FTX has introduced leveraged tokens, a really interesting asset to traders in the cryptocurrency market. Something that hadn’t been done by others and is now being adopted by the biggest exchanges like Binance. These are the BULL and BEAR tokens.
BULL and BEAR tokens
Basically a variety of leveraged tokens that trade at 3x of the underlying asset. These are ERC20 tokens issued by a smart contract on the Ethereum blockchain, which represents a 3x long or short position.
In order to maintain the 3x consistency, every 24h each leverage token reinvests profits if it made money. If it lost money, it sells off some of its position, reducing its leverage back to 3x in order to avoid liquidation risk.
In addition, any token will rebalance if an intraday move causes its leverage to be 33% higher than its target. So if markets move down enough that BULL token is 4x leveraged it will rebalance. This corresponds to market moves of roughly 10% for BULL/BEAR and 30% for HEDGE.
Here we can see the inverse correlation between the BTC/BEAR and BTC/BULL tokens:
These tokens are basically a simplified way of having leverage on a coin without having to worry about all the intricacies of margin trading. Practically removing the possibility of being liquidated as their algorithm rebalances the position to ensure that it never happens.
FTX is an exchange that is showing to be ahead of its competitors and trying to offer it’s users the very best.
Leveraged tokens are an incredible tool for those that don’t have too much time or attention to pay. This way you don’t have to get overly involved in margin trading. While at the same time having some peace of mind.
These tokens can be taken off the exchange and into an ERC20 wallet, or even a hardware wallet. Even traded in other exchanges like Binance.
Right now there are more than 30 coins that you can trade BULL/BEAR tokens on. Some of these are indexes of a certain group of coins, for example, a group of high cap altcoins (BCH, BSV, LTC, XRP, etc), or exchange coins (BNB, OKB). Giving you the option of having leverage on coins that you normally wouldn’t.