The U.S. Federal Reserve (Fed) announced on May 5 that it would raise the benchmark interest rate by 50 basis points to a range of 0.75%-1.00%. Then, other Fed officials said that “the possibility of raising interest rates by 75 basis points is not ruled out.” As a result, the price of BTC, which had risen briefly, went down again.
The de-pegging of UST from USD accelerated the downward price movement of BTC, causing BTC to drop below USD 30,000 at one point. According to CoinGecko data, BTC’s 7-day low fell by 16.8% and is now priced at $30,942. In the process of eradicating market bubbles, as investors do we have other more suitable products to help maintain our profitability or hedge risks?
Understanding leveraged ETFs
Leveraged ETF is a type of perpetual leveraged product that magnifies the price changes of the spot product and aims to provide leverage gains of the benchmarked perpetual futures.
The name of the leveraged ETF is represented by “cryptocurrency + leverage + long/short direction.” In other words, under different market conditions, leveraged ETFs can be used to achieve multiple profits by going long or achieve the same profits by going short.
Screenshot from MEXC Global On May 5, when BTC fell from $40,000, BTC3S started to rise from $0.63. Suppose you accurately judge the trend of BTC at this time and buy BTC3S. When BTC3S reaches a high of $1.35, you can get a 114% return.
Why are leveraged ETFs a good choice?
From a trader’s viewpoint, you can hold the spot and wait for the market to pick up in a falling market. You can also choose futures, margins, and leveraged ETF products for risk hedging. Compared to futures products:
Leveraged ETFs do not require margin, meaning that your positions won’t be occupied. As a result, its capital utilization is high.
Leveraged ETF trading is as simple and convenient as spot trading.
Leveraged ETFs do not have liquidation prices.
Compound interest effect. Due to the rebalance mechanism of leveraged ETFs, despite the market’s continuous change, the daily profit will be automatically transferred to the position and reinvested to achieve compound interest. Hence, its profit will be higher than that of margins or futures products of the same leverage.
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