Q: What is BTC leveraged ETF?
A: BTC leveraged ETF is a type of investment product that tracks the daily price of the underlying asset of BTC and earns multiple times of the daily gains of BTC (such as 2x, 3x or -1x, -2x). If BTC price rises by 1%, a 2x ETF will rise by 2% and a 3x ETF by 3%; or a -1x ETF will drop by 1% and a -2x ETF by 2%.
Q: How does a leveraged ETF make corresponding profits?
A: In nature, a leveraged ETF is a fund managed by a professional financial engineering team. Each ETF product corresponds to a certain amount of futures contract position. Fund managers can keep a fixed leverage ratio during a certain period by dynamically adjusting their futures position. The investment portfolio is managed and maintained by a professional team so that investors can easily build their own leveraged investment portfolio without having to learn how the mechanism works.
Q: What are the differences between leveraged ETFs and inverse ETFs?
A: As for leveraged ETFs, we have launched products with BTC and USDT as the underlying assets. Their names are similar to those of futures contract products. For example, we call the ETF with USDT as the underlying asset as leveraged ETF and the ETF with BTC as the underlying asset as inverse ETF. For inverse ETFs, when BTC price rises, since the fund’s underlying asset is BTC, the return denominated in legal tender will be slightly bigger than the specified leverage ratio. It happens the same way when BTC price drops. Therefore, we can say that an inverse product can generate a larger profit/loss than a leveraged product with the same ratio.
Q: What is the rebalance mechanism?
A: Due to the inherent characteristics of leveraged ETFs, we usually make regular adjustments to rebalance our investment portfolio to make sure the leverage ratio does not stray from the planned ratio. Normally, we adjust our position every 24 hours. If a volatile inverse fluctuation occurs and the fluctuation range has exceeded the threshold, we’ll also make a rebalance to control the risk of investment portfolio.
Q: What are the differences between leveraged ETFs and futures contract products?
A: Similar to futures contract products, leveraged ETF products are derivatives of leveraged products, which can magnify returns for investors and become a low-cost hedge tool. However, leveraged ETF products also have their unique features:
a.Nodeposit required. No margin call risk.
b.Afixed leverage ratio. For futures contract investors, the leverage ratio of a futures contract position may change in response to asset price change, resulting in an undesirable ratio. Let’s assume that an investor has created a short futures position with a low leverage. When asset price rises dramatically, the leverage ratio will rise to a very high level, which deviates from the investor’s original risk preference level. In contrast, leveraged/inverse ETF products have a relatively fixed leverage ratio and therefore can help investors better stick to their investment plans.
Q: What are the differences between leveraged ETFs and leveraged spot trading?
A: Compared to leveraged spot trading, leveraged ETFs do not require deposit and are free from margin call risk. What’s more, leveraged ETFs charge lower holding fee compared to the interest fee of leverage spot trading.
Q: What are the fees of leveraged ETFs?
A: The transaction fee to buy/sell ETF products on BISS exchange is 0.2% (0.1% for BISS membership owners). Meanwhile, we charge an additional 0.1% of the fund to pay for other fees generated by fund portfolio.
Q: What is NAV (net asset value)? What are the differences between NAV and price?
A: As a fund product, every ETF unit means a corresponding share of the fund and the real-time value of the share is the NAV of the ETF product. Meanwhile, since this product is actively traded in the secondary market, the latest price may differ from NAV. We list both NAV and the latest price to remind investors that the buy/sell price should not bear a big difference from NAV, or, in theory, investors may suffer losses.
Q: What kind of investors are leveraged ETFS well-suited to?
A: As a product which has stood the test of time in traditional financial market, leveraged ETFs are well-suited to most investors. However, they are especially suited to investors who believe that asset price will sooner or later form a trend or investors who have aversion for margin call risk. Due to the existence of management fee and some unique features leveraged/inverse ETFs have, investors may suffer great losses in a volatile market.
Take long 3x BTC product as an example. If BTC price changes in the last 4 days are +10%, +10%, +10% and 10%, then the 4-day return of this product is 185%, which is bigger than 3x 44% return of spot trading. If BTC price changes in the last 4 days are +10%, -10%, +10% and -10%, then the 4-day loss is 76%, which is less than 3x 35% loss of spot trading. If BTC price change in the last 4 days are +10%, -10%, +10% and -10%, then the 4-day loss is -17%, which is bigger than the 3x -2% loss of spot trading.
Q: How to purchase leveraged ETFs?
A: Apart from the event of BISS First Launch Subscription, you can also trade leveraged ETF products in corresponding trading pages. Later, we’ll also enable the functions of subscription and redemption at the same time so that users can subscribe and withdraw in net asset value, which facilitates the flow of large funds.