ETF is managed by the CoinW platform as the product manager to manage the ETF product. The product manager achieves the purpose of constant leverage through the management of the underlying assets.
Taking the user buying BTC3L as an example, the difference between the user's BTC/USDT 3x long leverage transaction is:
1. Convenient operation, no need for collateral assets
The way users buy BTC3L is the same as the operation process of spot trading. Users only need to buy and sell at the transaction price. The ETF product manager manages the underlying assets corresponding to BTC3L, and users do not need to pay collateral assets to achieve the purpose of leveraged trading.
2. The leverage is constant and the net value is worn out
(1) The leverage is constant
After the user purchases BTC3L, the platform configures and manages the underlying BTC assets corresponding to BTC3L held by the user, and the system will increase the position corresponding to BTC3L through the adjustment mechanism on a daily basis. The underlying BTC asset position is always at 3x leverage.
Example: A user uses a 3x leveraged product or a 3x contract product to go long BTC:
If the BTC price falls by 33% after taking a long position, the user's position will be liquidated and all assets will be lost.
If the price of BTC rises by 33%, the user's assets will double, and the leverage ratio of the actual funds will change from 3/1 to 4/2, that is, 2 times.
User BTC3L to long BTC:
If the BTC price drops by 11.11% after purchasing BTC3L, the actual leverage ratio becomes 4 times, the system will activate the rebalancing mechanism to reduce the position, avoid the liquidation of the position, and enable the user to reduce the loss in the unilateral downward market.
If the BTC price rises by 33.33%, the user's assets double, and the actual leverage becomes 2 times. The system will automatically use the profitable part to increase the position on the second day, so that the funds are still at 3 times leverage.
(2) Net wear and tear
If there is a situation where the price first falls and then rises during the day, for example, the price of BTC falls by 11.11% after purchasing BTC3L, and then rises by 12.5%. At this time, the price of BTC remains basically unchanged, but the net value of BTC3L has fallen by 8.33% due to the intraday adjustment of positions. Users may suffer greater wear and tear in volatile market conditions.
Risk warning:
ETF fluctuate greatly. Due to inherent market risks, fees, slippage, position adjustment algorithms and any unknown risks related to ETFs, the net value of ETFs may return to zero or the products may be offline. Please hold them with caution.