Increase Profit and Avoid Liquidation Risk with KuCoin Leveraged Tokens — AMA Transcript
Dear KuCoin Users,
Time: April 26, 2021, 11:00-12:21 (UTC)
KuCoin has been striving to bring more benefits to users, improve the user experience and provide users with more trading options.
On April 20, 2021, KuCoin officially launched the leveraged tokens.
To help crypto newbies get more familiar with KuCoin Leveraged Tokens, KuCoin hosted an AMA (Ask-Me-Anything) session with Lucas Wang, KuCoin Leveraged Tokens Manager, in the KuCoin Exchange Group.
About KuCoin Leveraged Tokens
KuCoin Leveraged Tokens are tokens with the added benefit of leverage. Traders also amplify their investment returns with leverage by simply buying and selling leveraged tokens (it’s essentially the same as trading in the Spot Market) without paying any principal. Leveraged tokens effectively increase profit and avoid liquidation risk through the automatic adjustment of leverage. Their features include no risk of liquidation, no need to pay margin, and automatic compound interest.
Lucas Wang — KuCoin Leveraged Tokens Manager
Lucas is an early practitioner of blockchain. Since 2014, he has been involved in the blockchain industry and has been responsible for the blockchain business in many companies. He joined KuCoin in 2019 and currently serves as the head of KuCoin Leveraged Tokens.
Q&A from KuCoin
Q: What are KuCoin Leveraged Tokens?
Lucas: KuCoin Leveraged Tokens are tokens with the feature of leverage, which is under the management of the fund manager, aiming to provide traders with a specific multiple of profit of the underlying asset by trading leveraged token shares.
BTC3L stands for 3x leverage long for BTC. If you are optimistic about BTC, buy BTC3L.
BTC3S stands for 3x leverage short for BTC. If you are pessimistic about BTC, buy BTC3S.
Q: What are the advantages of KuCoin Leveraged Tokens?
Lucas: Although leveraged tokens are featured with leverage, they still belong to the Spot trading type.
Leveraged tokens come with the following advantages:
1. No liquidation
2. No requirement on margin or loans
3. User-friendly operations (it’s essentially the same as trading in the Spot Market)
Q: How to make profit with KuCoin Leveraged Tokens?
Lucas: Well, you just need to judge the trend of the market.
When you are bullish on the underlying asset, buy a “bullish” leveraged token. When you are bearish on the underlying asset, buy a “bearish” leveraged token.
For example: If you are bullish on BTC, then buy BTC3L. When BTC price rises by 1%, BTC3L also rises by 3%. On the contrary, if you are bearish on BTC, then buy BTC3S. When BTC price drops by 1%, BTC3S rises by 3%.
Q: Where can the investors start trading the KuCoin Leveraged Tokens?
Lucas: For web users: Investors can get started in leveraged tokens by clicking “Leveraged Tokens” under the “Derivatives” menu in the KuCoin homepage interface, then click “Trade” to get started.
For app users: Simply click ETF on the interface to get started.
Q: What is the difference between ‘Subscribe & Redeem’ and ‘Trade’？
Lucas: “Subscribe and Redeem” means that traders directly trade with the leveraged token management team and directly buy and sell leveraged tokens from the leveraged token management team. “Trade” means users trade with each other in the Spot trading market.
However, Subscribe and Redeem are only carried out three times per day. They are affected by many uncertain factors, and the transactions are not always timely unless users need to trade a very large number of leveraged tokens.
It is recommended to “Trade” leveraged tokens directly rather than “Subscribe and Redeem”.
Q: Can the investors deposit or withdraw leveraged tokens?
Lucas: Currently, leveraged tokens are not depositable or withdrawable.
Q: How does KuCoin Leveraged Tokens rebalance?
Lucas: KuCoin Leveraged Token introduces a rebalancing mechanism.
As we know, the leverage of KuCoin Leveraged Tokens is fixed.
To ensure that the ratio of the combined leverage portfolio will not deviate much from the agreed one, the system will rebalance the positions at 23:30:00-23:45:00 (UTC) every day (apart from in exceptional circumstances).
When facing sharp fluctuations, if the change of the underlying asset exceeds the given threshold, KuCoin will also rebalance the positions to control the risks compared with the last rebalancing.
Q: What fees will KuCoin Leveraged Tokens generate?
Lucas: The fees associated with KuCoin Leveraged Tokens are as follows:
1. Trading Fees: The fee schedule is the same as that of the Spot trading.
2. Subscription Fees and Redemption Fees: Subscription fees are charged when users subscribe to tokens. Currently, the fee rate is 0.1% per subscription. Redemption fees are charged when users redeem tokens. Currently, the fee rate is also 0.1% per redemption.
3. Management Fees: Management fees are charged at the rate of 0.015% by 23:45 (UTC) every day. The fee will be incorporated into the net asset value of the Leveraged Tokens.
Q: Is leveraged token trading suitable for long-term or short-term holding?
Lucas: Leveraged token is suitable for short-time holding.
As we mentioned before, the system will rebalance the positions every day.
In this process, there will be net value wear and tear. To avoid it, it’s better to hold leveraged tokens in the short-term.
Q: What kind of investors are suitable for leveraged token products?
Lucas: Leveraged tokens are especially suitable for investors who want to get leveraged profit but do not want to bear the risk of liquidation.
Leveraged tokens are featured with leverage, and they could bring investors with a specific multiple of profits of the underlying assets.
Q&A from KuCoin Community
Question Collection Form
Q: Do KCS holders benefit from trading leveraged tokens?
Lucas: Well, if you hold KCS, you can pay KCS for the trading fee to get a 20% discount. “KCS Pay Fees” is also applied on leveraged tokens trading.
Q: Will there be more leveraged tokens available in the future?
Lucas: We plan to launch more leveraged tokens from next month, such as DOGE3L, BCH3L, and LTC3S. By the way, leveraged tokens with higher leverage are also in our plan, such as BTC5S and ETH5L.
Q: Will there be a demo or trial for this product?
Lucas: Yes, we have invited some test users to test in sandbox. You can also try it out in sandbox now: https://sandbox.kucoin.com.
In addition, if you have any questions, we welcome you to join the KuCoin Leveraged Tokens Telegram group: https://t.me/LeveragedTokenKuCoin
Q: What is the best way to do risk management in Leveraged Tokens?
Lucas: As we mentioned earlier, due to the existence of the rebalancing mechanism, long-term holding of leveraged tokens will wear out your assets.
So just hold your leveraged tokens in the short-term!
Q: Is there a video that shows me how to trade leveraged tokens?
Lucas: We are currently making some videos about leveraged tokens and you will be able to see them in the near future.
Free-Ask on Telegram
Q: Why is KCS not listed in leveraged tokens?
Lucas: We are considering adding KCS to leveraged tokens.
Q: Any changes to make the ETF 7S/7L?
Lucas: The risk is a little bit too high, but not impossible.
Q: Why will users trade leveraged tokens? Are there more benefits than general tokens?
Lucas: You can get 3x profit from 3x leveraged tokens compared with general tokens!
Q: We know that leveraged token investments are very risky. You say that KuCoin Leveraged Tokens reduce this risk. How will it be?
Lucas: Compared with Margin trading and Futures, the unique rebalancing mechanism of leveraged tokens can effectively reduce risks.
Total rewards: 230 USDT
1. Question Collection for KuCoin Leveraged Tokens AMA, Win a Share of 200 USDT Rewards!
Selected Questions: 50 USDT
Participation Reward: 150 USDT
2. Free-ask section: 30 USDT
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