Hello
Just a buy signal here with this falling market
This is a not financial advice
"Why You Shouldn't Hold Leveraged Tokens Long Term
Leveraged tokens are often the most misunderstood products in the crypto industry. These tokens are essentially funds that use derivatives and leverage to amplify the returns of an underlying asset. Typically, a leveraged token offers a multiplier of an index or a specific asset's daily return. For instance, a 3x Long BTC will generate triple the daily returns of Bitcoin.
Many traders get confused when a token's performance does not add up with its respective index. This article shall dive into why leveraged tokens' performance may differ over time and why they are not a long-term bet.
How Do Leveraged Tokens Perform When They Are Held for Longer Than One Day?
Leveraged tokens are built to multiply the underlying asset's daily return-the main component to remember here is DAILY. The leverage factor of a token will be reset every day. As a result, the performance of a token and its underlying asset can differ over the long term.
While the comparison of daily and total returns can sound trivial, the math behind them differs in contrast. For example, even a non-leveraged portfolio that loses 10% on one day would not be able to break even with a simple 10 % increase on the next day. An investment of $100 that loses 10% on one day is worth $90 at the end of the day. But if the price goes up 10 percent on the second day, that's a 10 percent rise from $90, bringing the price at $99. Clearly, the math didn't add up as you would expect.
As such, in the event of losses, a portfolio needs a return greater than its loss to break even. The graph below shows the subsequent rate of return needed to break even at varying levels of portfolio losses." -Binance Blog
Just a buy signal here with this falling market
This is a not financial advice
"Why You Shouldn't Hold Leveraged Tokens Long Term
Leveraged tokens are often the most misunderstood products in the crypto industry. These tokens are essentially funds that use derivatives and leverage to amplify the returns of an underlying asset. Typically, a leveraged token offers a multiplier of an index or a specific asset's daily return. For instance, a 3x Long BTC will generate triple the daily returns of Bitcoin.
Many traders get confused when a token's performance does not add up with its respective index. This article shall dive into why leveraged tokens' performance may differ over time and why they are not a long-term bet.
How Do Leveraged Tokens Perform When They Are Held for Longer Than One Day?
Leveraged tokens are built to multiply the underlying asset's daily return-the main component to remember here is DAILY. The leverage factor of a token will be reset every day. As a result, the performance of a token and its underlying asset can differ over the long term.
While the comparison of daily and total returns can sound trivial, the math behind them differs in contrast. For example, even a non-leveraged portfolio that loses 10% on one day would not be able to break even with a simple 10 % increase on the next day. An investment of $100 that loses 10% on one day is worth $90 at the end of the day. But if the price goes up 10 percent on the second day, that's a 10 percent rise from $90, bringing the price at $99. Clearly, the math didn't add up as you would expect.
As such, in the event of losses, a portfolio needs a return greater than its loss to break even. The graph below shows the subsequent rate of return needed to break even at varying levels of portfolio losses." -Binance Blog