Recently, we launched our first leveraged tokens — Bitcoin 3x Daily Long (BTC3L), 3x Daily Short (BTC3S), Ether 3x Daily Long (ETH3L), and Ether 3x Daily Short (ETH3S). We would like to help community to learn about how the tokens works so you can start trading today.
What are leveraged tokens?
Leveraged tokens are Ethereum-based ERC-20 tokens created by Amun to give token holders easy access to leveraged long and short daily returns of cryptoassets like Bitcoin and Ether. To put it simply, a leveraged token maintains notional exposure to 3x or -3x of the daily returns of a crypto asset like Bitcoin or Ethereum.
This made possible through the use of Amun’s Jasper platform which facilitates margin positions in the cryptoassets in question both for long and short positions through the use of perpetual swaps, whilst also rebalancing on a daily basis in order to maintain daily notional leveraged exposure.
To give an example, our Bitcoin 3x Daily Long (BTC3L) tokens maintain notional exposure to 3x of the daily returns of Bitcoin and our Ether 3x Daily Short (ETH3S) tokens maintain notional exposure to -3x of the daily returns of Ether. This means that if Bitcoin were to rise by 3% on a single day then BTC3L would aim to rise by 9% on the same day. The use of these tokens greatly improves the user experience of maintaining leverage to cryptoassets by allowing traders to not worry about managing funding rates or borrowing costs — while at the same time allowing token holders to move their positions between exchanges. in addition, they make the probability of your position getting liquidated extremely unlikely.
How leveraged tokens work
Let’s take a very simple example; what would happen to the prices of BTC3L and Bitcoin 3x Daily Short (BTC3S) tokens if Bitcoin’s price over 3 days is as follows: Day 0 — $100, Day 1 — $103, Day 2 — $106.09, in other words two days of Bitcoin increasing by 3%. We assume that Bitcoin, BTC3L, and BTC3S all begin day 0 at a price of $100. The table below shows the assets’ return profile over those days.
As we can see, both BTC3XLONG and BTC3XSHORT track 3x and -3x of Bitcoin’s returns over a single day. Please note that these tokens do not track 3x or -3x of Bitcoin’s returns over multiple days.
For example, it’s easy to see that the two day return of BTC3L (18.81%) is actually more than 3x of Bitcoin’s (6.09%) and the two day return of BTC3S (-17.19%) is actually less than -3x of Bitcoin’s. This phenomenon is due to the compounding of our inverse and leveraged tokens and can be beneficial in situations where the market is following a trend but harmful in periods of mean reversions. The chart below replicates the data from the table above to further show the point.
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This document may contain independent market commentary prepared by Amun based on publicly available information. Although Amun endeavors to ensure the accuracy of the content in this document, Amun does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this document make no warranties or representation of any kind relating to such data. Where Amun has expressed its own opinions related to product or market activity, these views may change. Neither Amun, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this document or its contents.
Crypto asset trading involves a high degree of risk. The crypto asset market is new to many and unproven and may have the potential to not grow as expected. Currently, there is relatively small use of crypto assets in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in crypto assets. In order to participate in the trading of crypto assets, you should be capable of evaluating the merits and risks of the investment and be able to bear the economic risk of losing your entire investment.
Nothing in this document (or any other documents mentioned herein) is or should be considered to be an invitation to enter into an investment and is not intended to be an offering of securities in any jurisdiction nor does it constitute an offer or an invitation to sell shares, securities or rights belonging to the Issuer or any related or associated company. This document has not been registered with or approved by any regulator in any jurisdiction.
Readers are cautioned that any historical performance information or forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results or performance may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax, or other advice and users are cautioned against basing undue reliance, investment decisions or other decisions solely on the content hereof.
Any historical performance included in this document may be based on back testing which is a means of evaluating a particular strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested performance is purely hypothetical and is provided in this document solely for informational purposes and neither represents actual performance nor should it be interpreted as an indication of actual or future performance.
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Amun is a leading crypto technology company which aims to make purchasing digital asset tokens accessible, safe, and efficient.