Gate.io records highest daily volume of $ 420 million for leveraged ETFs
The Gate.io digital asset exchange exceeded $ 420 million in daily trading volume in August 2021 for its leveraged ETF offering, accounting for 53% of the total spot trading volume on Gate.io for the day.
After 15 years of use in traditional financial markets, Leverage ETF entered the cryptocurrency market. Investors take advantage of small investments to generate large returns, diversify the risks associated with crypto trading, providing significant benefits without trading margins. More and more investors are choosing to trade using Leverage ETF.
“Data shows that the highest one-day volume for leveraged ETF products traded on our platform in August 2021 exceeded $ 420 million. This is a new step for our platform and proof that by innovating and providing users with sought-after features, platforms will thrive, ”said Marie Tatibouet, Director of Marketing at Gate.io
Since its introduction to the cryptocurrency market in 2019, Leverage ETF Offers have become one of the most popular trading options offered by traditional cryptocurrency exchanges. So what exactly is a leveraged ETF and how did it become one of the most popular offerings on crypto exchanges?
Leverage ETFs at a glance
Exchange Traded Funds, or ETFs for short, are a popular investment method in the traditional financial industry. Through the use of leveraged investment tools such as stock index futures and swap contracts, the target index of funds can be tracked daily with a certain fixed leverage ratio, so s ‘It is moving in the right direction, investors will continue to receive income in the same percentage as their investment regardless of the price. In the summer of 2006, ProShare issued the first batch of leveraged ETFs based on the Nasdaq and the S&P 500 in the US market.
Since then, leveraged ETFs have gradually become one of the most popular investment methods in the market. For example, the 3x leverage product of the Nasdaq means that if the Nasdaq stock index increases by 1% in one day, theoretically the net value of the leveraged ETF offering will increase by 3% on that day, offering investors higher than normal returns. In addition, there are reverse leveraged ETFs, also known as short ETFs, which are a multiple of the inverse of the index tracked daily. The Nasdaq -3x inverse product means that when the Nasdaq index declines by 1% on any given day, the ETF’s net worth will theoretically increase by 3% on that day, which means that there are also opportunities in a bear market.
The advantage of Leverage ETF is that leveraged products can be traded freely at any time. The biggest advantage of Leverage ETF products is that they can automatically open a greater percentage of returns without having to pay for the margins. Under the right market conditions, with accurate forecasts, investors can benefit from higher returns than usual by using Leverage ETF. Investors can avoid paying the costs associated with margins, spread their transactions over a longer period, and use the interest to cover costs over time without facing liquidation.
Overview of crypto leveraged ETFs
At the end of 2019, the first cryptocurrency Leverage ETF Was launched. Leverage ETF were officially introduced to the cryptocurrency market, and Leverage ETF have been integrated into cryptographic exchanges with the corresponding products offered. The main difference between a cryptocurrency Leverage ETF and a traditional leveraged ETF is reflected in the investment tools offered. Cryptocurrency Leverage ETF Replaces traditional leveraged investment tools such as stock index futures and swap contracts with the corresponding spot offers in crypto perpetual contracts.
In terms of investment objectives and strategies, as well as how it works, cryptocurrency Leverage ETF inherited all the advantages of traditional leveraged ETFs while offering more flexible leverage trading. It is generally described by the currency x multiple x direction long and short. For example, BTC3L represents a 3 times bullish token for Bitcoin and BTC3S represents a bearish 3 times token for Bitcoin. If BTC increases by 1% on the same day, the net worth of BTC3L will increase by 3%, while the net worth of BTC3S will decrease by 3%. If BTC drops 1% on the day, if BTC3L’s net worth drops by 3%, and BTC3S’s net worth will grow by 3%. Based on market demand, various exchanges have started to offer ETF products of multiple variables, such as 5X leverage ETFs and 2X leverage ETFs.
Due to the existence of the daily position adjustment mechanism, Leverage ETF have clear advantages in a one-sided market that continues to rise or fall. Floating positions adding profits can have the effect of compound interest, allowing investors to earn more returns; However, in a volatile market, Leverage ETF have no advantage.
If an investor buys for $ 100 of a BTC3L or 3S product, their holdings will be worth less than $ 100 after a rise and fall. Short-term fluctuations can lead to permanent long-term losses. On the other hand, in a unilateral market, if investors are mistaken in their judgment of the market, Leverage ETF can also automatically cut some of their positions and stop losses in time to reduce the loss for investors. Therefore, Leverage ETF are often used as risk hedging tools to reduce transaction risks.
The high risk and volatility associated with investing in the crypto market has always been a major factor hampering the progress and growth of cryptocurrencies. As the exchanges grow and innovate to provide exciting new features and opportunities for investors, Leverage ETF have become a hot topic in the industry. With lower barriers to investment, less product risk, and higher returns for investors, it’s no surprise that Leverage ETF have become one of the most popular trading products offered by most of the major crypto exchanges.
Gate.io is a leading digital currency exchange with over 6 million users in 190 countries around the world. The exchange offers spot, margin, futures and contract trading in addition to DeFi products via HipoDeFi, custodial services via Wallet.io, investments via Gate Labs and its dedicated GateChain platform. The company also offers a fully integrated suite of products such as its Startup IEO platform, NFT Magic Box Marketplace, crypto lending and more.
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