Lecture 1: What are Leveraged Crypto ETFs?

Leveraged Crypto Exchange Traded Funds (ETFs) are a marketable security that use financial derivatives and debt to amplify the returns of an underlying crypto. While a traditional exchange-traded fund typically tracks the securities in its underlying index on a one-to-one basis, a leveraged ETF may aim for a 2:1 or 3:1 ratio

Leveraged ETFs are a perpetual product - which means they do not have to be settled by a certain date. In theory, their price will never fall to zero because of rebalancing actions taken by the fund managers, so there is minimal liquidation risk. Investors are able to trade leveraged ETFs in the secondary market at any time with no need for margin.

The value of a leveraged ETF product is calculated in USDT and is normally spot traded. A leveraged ETF, essentially, is a fund in shares that is pegged to the return rate of an underlying asset. When the underlying assets fluctuate against the leveraged ETF beyond a certain threshold, the fund management party will rebalance the fund composition to ensure the targeted leverage is retained.

Simply put, investors are able to enjoy the yield of underlying crypto assets with a certain multiplier effect by trading the corresponding leveraged ETF product which is protected from liquidation risks via control measures taken by the fund management agent.

MEXC now supports up to 3x long leverage (3L) and 3x short leverage (3S). Users can view the leveraged ETF products by clicking the “Market” tab followed by “ETF”.

Disclaimer:

Crypto Leveraged ETFs are an emerging financial product. The content above does not constitute investment advice. Please be aware that all investments carry risk. Trading leveraged ETFs may seem simple but inexperienced/amateur traders should be wary as cryptocurrencies can be highly volatile.

Crypto Leveraged ETFs may reduce the risk of liquidation, but in extreme conditions their price may approach zero and they may be liquidated. Please pay attention to the difference between order price and net value to avoid losses.