Hello steemians, first of all, I would like to thank the entire steemit team for the effort and endless support made to raise the level of content which is without doubt in the interest of everyone. Personally, these competitions contributed to the development of my knowledge in the world of cryptocurrencies. By research and reading, I was able to understand several terms I used to see and pass without scrutiny, but now I have become proficient in it and I understand their pros and cons. I will continue today in my fifth post on #poloniexspotlight contest to discover a new term namely FTX leveraged tokens recently integrated in Poloniex.
Introduction :
The cryptocurrency market is developing significantly and increasing innovation in it day after day with the aim of attracting more traders. Among the most important new products that have appeared in cryptocurrency trading: Leveraged tokens.
Poloniex had integrated FTX leverage tokens, tokens that allow for margin trading in spot trading mode with x3 leverage.
What are FTX leveraged tokens?
A leveraged token is a financial derivative that enables exposure to a leveraged trading position in a cryptocurrency without the complex aspects of managing margin trading.
Meaning, tokens for leverage are symbols that represent long or short leverage.
The distinguishing point of the new leveraged tokens is that it enable taking leveraged positions without having to deal with collateral, funding rates, margin management, and liquidation.
It sums it all up with its relative simplicity, which is the reason why it has garnered so much attention since its inception.
Leveraged tokens were first introduced through the FTX cryptocurrency exchange platform to provide a new way for traders to take leveraged positions on a wide range of digital assets.
Since then, a number of other trading platforms have followed suit, including Poloniex.
In the image below, for example, you can see the “3X Long Bitcoin Token” that is trading on FTX and is a long position backed by three times the weakness of Bitcoin on a daily basis.
How do leveraged tokens work?
Most of the explanations that exist today are placed theoretically or incorrectly, leading to the failure of the correct information to reach the traders and they fall into a loss due to their misunderstanding of the mechanism of its work, beginning with the loss and profit in these currencies, and although they are present in the regular trading section, it is in a multiplier and cumulative system, so the profit is 3 times as well as the loss. Also, every day, the decline or rise in progress is calculated and the currency is re-quote.
We will explain through examples to fully illustrate:
- Suppose that Bitcoin was at $ 10,000 and fell by 20% within one day, that is, it became $ 8,000.
- Then the bull will be at $ 30,000 and will fall by 60% at the same time and will become $ 12,000.
- The next day, we will assume that Bitcoin continues to decline and lost 30%, then the price will have become $ 5,600.
- As for the bull currency, its loss for today will be equal to 90% and its price will be $ 1200
- Now Bitcoin was at $ 10,000, losing 20% on the first day and 30% on the second day, or 44% of the initial price, and its price became $ 5,600.
- As for the bull currency, it was $ 30,000, losing 60% on the first day and 90% on the second day, or 96% of the initial price, and its price became $ 1,200.
As it is known, loss compensation needs a larger percentage to reach the initial price, as the loss ratio is 44%, and an increase of 80% is required to reach the initial price.
We will assume that Bitcoin rose by 80% in one day and returned to the initial price, while the bull currency would rise by 240%, but the price would reach $ 4,080, and this is still much lower than the initial price of this currency.
To understand the combined method of calculating profit in this currency, we will calculate that the rise took place over two days :
Bitcoin at a price of $ 5600 on the first day rose 30%, so its price became $ 7280, and on the second day it rose 40%, and its price became almost $ 10192, returning to the initial price.
As for the bull currency, at $ 1200, on the first day, it will rise by 90% and will become at $ 2280, and on the second day it will rise 120% and its price will be $ 5016, which is less than the initial price, but it is higher than the price if the rise is within one day.
Which leveraged tokens are available on Poloniex?
Poloniex support deposits and withdrawals for 16 leveraged tokens :
- BULL: 3X Long Bitcoin Token
BEAR: 3X Short Bitcoin Token
- TRXBULL: 3X Long TRX Token
TRXBEAR: 3X Short TRX Token
- BSVBULL: 3X Long Bitcoin SV Token
BSVBEAR: 3X Short Bitcoin SV Token
- ETHBULL: 3X Long Ethereum Token
ETHBEAR: 3X Short Ethereum Token
- BCHBULL: 3X Long Bitcoin Cash Token
BCHBEAR: 3X Short Bitcoin Cash Token - EOSBULL: 3X Long EOS Token
EOSBEAR: 3X Short EOS Token - XRPBULL: 3X Long XRP Token
XRPBEAR: 3X Short XRP Token - LINKBULL: 3X Long Chainlink Token
LINKBEAR: 3X Short Chainlink Token
To learn more you can watch this explanation video :
Pros and cons of leveraged tokens:
As with all financial products, there are advantages and disadvantages, and of course leverage tokens are no exception.
Positives:
- Anyone can, without the technical aspects of margin trading, take an intraday leveraged position in a cryptocurrency .
- Due to the presence of leveraged coins on the Ethereum blockchain as ERC20 tokens, it can be transparently tracked and carried in your personal Ethereum wallet.
Negatives:
- Leveraged trading is risky, as the value of the leveraged tokens can drop dramatically especially if the market moves significantly and rapidly.
Conclusion :
This was a short overview of leveraged tokens, these are new experimental derivatives and have many errors that can occur, so it is advisable not to risk too much with these new investment products. Since they are rebalanced daily, the leveraged tokens are not intended to be held for the long term. If you want to take a medium or long term leverage position, it is best to go the traditional route of using margin trading.
Thank you for taking part in the Spotlight on Poloniex Contest.
Keep following @steemitblog for the latest updates.
The Steemit Team
We are curious about your voting pattern.
The large majority of your votes go to a range of accounts that are all creating random subject posts with no engagement and they are ALL currently powering down and cashing out their STEEM.
For example @chinley @ifrock @redfoster etc
It seems to be an odd choice of accounts to be voting on...
cc @sapwood
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Hi @kouba01,
I have engaged with you since the time #steemcryptochallenge and I come across a few good articles from you. Through such contests not only we earn money but we also get to research and have the scrutinized info, that makes us informed about a particular project/exchanges.
That said, if we engage with others, we disseminate the information, the correct one. Without engagement, it is not possible if someone has incorrectly published something. Similarly, when we come across "why and how" kind thing in our comment section, we get the better perspective of the subject we are writing.
So we should also visit other's posts in this contest to know better about the project, even we can correct someone if he is not aware of the updated features of an Exchange or any crypto project. That fosters the idea of community with an informed choice about a project, exchange, etc. So it is always good if we engage with those who are engaging actively within this particular challenge, we can also build a social network passively. That creates a sense of belongingness, active participation in this challenge.
To be honest, mathematically you could earn more if you vote other's posts in #poloniexspotlight. Steemcurator01 is voting every one in this contest, so before Steemcurator01 visits anyone we would visit the post, engage with them vote, them, in return we earn a better curation reward, also potentially we will earn #onepercent and #twopercent votes. That's always a profitable deal to engage with others.
Steem on.
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hello @steemcurator01, I understood what you are aiming for, I voted as many times for the steemians who participated in our contests ... but you're right, I have to engage more with the users who create the right and good contents.
Maybe I am a bit busy these days, so I find a little time to write and to read at the same time the other contributions, but I believe a lot in sharing and collaboration, for that I promise to devote more time for reading and commenting on other posts.
Thanks @sapwood also.
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promotion twitter
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At times margin trading is too tricky & difficult for people to understand, for them, the leveraged tokens will work fine which is easy to understand and the technical settlement is also more or less the same, with the only difference that it is requoted each day by calculating loss or profit.
Thanks
#twopercent #india #affable
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I totally agree with you the leveraged tokens it's easier but it's too risky. One must have a good reading of the market before making a decision to trade in this service.
Thank you.
#affable
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