Dear Dcoin users:
To fully meet the multiple trading needs of users, Dcoin will launch an innovative financial product——Leveraged ETF at 8:00 (UTC) ,19th February. The first round of trading pairs include:
|Underlying Token||3x Buy(long)||3x Sell(short)|
What is Leveraged ETF?
A leveraged exchange-traded fund (ETF) is a product that uses financial derivatives and debt to amplify the returns of an underlying token. For example, if the underlying token rises 1%, the corresponding 3x leveraged ETF rises 3% respectively, while the -3x products falls 3% respectively.
A leveraged ETF is essentially a fund managed by a professional financial team. Each ETF product corresponds to a certain number of futures contract positions. The fund manager can dynamically adjust the futures positions so that the entire fund share can maintain a fixed leverage for a certain period of time. A professional team is responsible for the management and maintenance of the investment portfolio, allowing investors to easily build their own constant leveraged investment portfolio without needing to understand the specific mechanism.
What are the characteristics of ETF?
Similar to futures contract products, leveraged ETF products are derivatives with leverage effects, which can amplify investors' returns and become a cheap risk hedging tool. However, compared to futures contracts, leveraged ETF products have the following unique characteristics:
(1) Spot trading and no need of margin
Investors can trade leveraged ETF on Dcoin with the same process of spot trading. There is no margin required, so no liquidation problem. Take purchasing BTC3L (3x long of BTC) as an example. Users only need to check the net value, select the proper price, and enter purchase quantity to buy BTC3L.
(2) Compound-interest effect
The profit of the leveraged ETF product will be transferred to the principal automatically by the system. That is, if a user is gaining profit from the leveraged ETF he bought, the profit will be added to the principal in the next rebalance period (every day). As a result, the user’s position of the 3x leveraged ETF product will increase to gain compound-interest effect.
(3) No risk of liquidation
Leveraged ETF brings in risk-control mechanism. For example, if BTC falls by 33%, the 3 times BTC long contract will be liquidated undoubtfully, while the leveraged ETF product BTC3L, through rebalance mechanism, will not approach zero. There will be some asset left.
(4) Lower rates than leveraged trading
Compared with the interest expense of the loan fund of the leverage transaction, the holding rate of the leverage ETF product is lower. Compared with other platforms, the transaction capital rate of leverage ETF products of dcoin is lower, and the daily management fee charged for each leverage is only 0.1%.
References for frequently asked questions about leveraged ETF：FAQ for Leveraged ETF
Trading guide for details: Guide for Leveraged ETF (Details)
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