Leveraged Tokens Introduction
Leveraged Tokens is a cryptocurrency derivative designed to give traders leveraged long or short exposure to a specific cryptocurrency without the need to continuously manage margin; it also amplifies potential losses.
Basic Concepts
Leveraged Tokens provides leveraged exposure in token form, allowing traders to participate in leveraged long or short positions without continuously handling margin requirements. It does not eliminate risk, and fluctuations in the price of the underlying cryptocurrency still directly affect the token’s performance.
How They Work
These tokens typically use algorithms to automatically adjust leverage based on changes in the price of the underlying cryptocurrency. For example, with a 3x long leveraged token, if Bitcoin rises 1%, the token’s target gain is approximately 3%; if Bitcoin falls 1%, the token’s target loss is approximately 3%。
Risk Warning
Leveraged Tokens may be highly volatile and are not suitable for all investors. If the underlying asset moves in the opposite direction to that expected, leverage amplifies both losses and gains. When learning about these products, first understand their mechanisms and risks, then assess whether they are suitable for your circumstances.
Original Tutorial
https://www.binance.com/en/academy/glossary/leveraged-tokens
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