Leading Cryptocurrency exchange Kucoin has just announced a first batch of leveraged tokens. These can be traded in beta testing in the Kucoin Sandbox. This feature is expected to go live on the main exchange in mid-March.
The tokens include BTC3L, BTC3S, ETH3L and ETH3S. They will allow traders to apply 3x leverage on BTC and ETH. For example, If BTC goes up 1%, then the net value of BTC3L will increase by 3%. The same applies if BTC goes down 1% in the case of BTC3S.
Leveraged tokens could be said to be more trader friendly in that they are crypto derivatives without a due date. Whilst returns can be increased with a 3x leverage, the trader can have peace of mind knowing that they will not be liquidated.
KuCoin Global CEO Johnny Lyu remarked:
"As an innovative derivatives product, KuCoin Leveraged Tokens have unique features, such as zero margin fees and no risk of liquidation. With the launch of this service, KuCoin will give users easier access to more advanced investment tools. Next, KuCoin Leveraged Tokens will support more top coins like LTC and trending coins in the DeFi field or Polkadot ecosystem, complementing KuCoin's ecosystem as a leading crypto trading service provider."
In an example given by KuCoin, the kind of gains could look like this:
"if the Bitcoin price rises 10% for four consecutive days, the theoretical return of BTC3L on KuCoin can be 185%, more than 3 times higher than the gains in the Spot market."
This type of trading already exists in traditional financial markets and is considered to be suitable for a large majority of crypto investors, however, for the inexperienced investor, any kind of leveraged trading can be extremely risky, and should be eyed with caution.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.