Leveraged Tokens Binance It is a new concept that not everyone fully understands, and now the editors of cryptomais.com will try to explain it in detail. You should understand the subject as best as possible before you start using this tool for business, because although it can generate high profits, the risks are also very important. The tokens used are also named LT (Limited Tokens) they are designed to enhance the functionality of the original cryptocurrency with “permanent electricity”.
Product Page: https://www.binance.com/leveraged-tokens/tokens/allTokens
Where to sell LT: exchange Bybit.
What are leveraged tokens?
Available tokens which is available for purchase/sale on the Binance local market and provides the opportunity to sell underlying assets, for example BTC or BNB, with “built-in” leverage. In essence, these tokens are a kind of basket with infinite contractual terms.
If we compare margin trading with LT, then the latter are more convenient – they allow you to make full use of the conditions without the need to provide margin and its support, without liquidation risks. However, such equipment has its risks, we will talk about them later.
The tokens used on Binance are different from other cryptocurrency exchanges. Typically LTs have a fixed power, like 3x. But on Binance your leverage varies from 1.5x to 4x. Independent adjustment of the coefficient helps to increase the profit from positions and reduce risks.
How leveraged tokens work on Binance:
- The cease and desist order is largely intended to prevent ongoing trades. Otherwise, some traders may profit early upon learning of an event.
- Token balancing (more below) is not done unless required by current market conditions.
- Market consumption is reduced, again by hiding the size of the profit. Therefore, it is impossible to know in advance when equilibrium will occur.
- Energy tokens are traded on the market.
- Each token can be redeemed for the price it represents (NAV, net equity), and requires payment of a ransom fee. But it is recommended to leave the region without paying, but only through the local market – it is cheaper.
Leveraged tokens are very risky products. They can only be sold if you fully understand the nuances and principles of operation. Such assets can lose more than half of their value in a single day.
They are used always
LT business involves certain risks. First of all, these are price changes in the market for permanent contracts, as well as financial and wage rates.
Top reasons to use power tokens:
- Risk management. Tokens reinvest profits into low-cost cryptocurrencies; for example, if your situation in Power token brings profit, positions are automatically opened with borrowed funds and with a size corresponding to the set rate. And vice versa: if on the regular online market you buy a 3x long ETH position, after a month ETH will decrease by 33%, then the position will be liquidated and the trader will lose money. As for leveraged tokens, if the market falls, there will be no liquidation and the trader will still have money.
- Easy management of borrowed funds. Pricing is easy in the market, no worries about margin, liquidation (although possible in rare cases due to rebalancing). You spend a certain amount on the token and get a long or short position based on the strength of the chosen asset.
However, there are situations where Power token will not work and you should choose another type of business:
- They are not suitable for long-term investments. Although at first glance this may seem profitable given the leverage, in reality, due to the constant balancing of the leveraged token, there is a significant loss of profit. This is invisible in normal markets, but in volatile markets it can cause significant damage.
- It follows from the past that in highly volatile markets it is better to avoid such instruments. The more a cryptocurrency falls, the worse the loss.
As a result – LT They are easy to use, but you hide some problems behind the scenes. There is no possibility that they will give more profit if you invest for a long time.
Why is balance necessary?
We've mentioned this idea many times, let's cover it in more detail.
Each token comes with a target value, for example 3x (multiple platforms). To save energy, the platform automatically adjusts the tokens. If a profit is made, this profit is returned. But if a loss occurs, part of the position is sold. As a rule, when improving platforms, balancing happens every day, and if market volatility is high, even more frequently.
On Binance the situation is a bit different. The height here is not adjusted, but it is adjusted automatically, so there is no need to adjust it often, but sometimes it still happens (with strong fluctuations).
Tips for Profitably Trading Tokens on Binance
A quick guide on how to buy tokens on the Binance exchange. It's easy and only takes a few minutes.
- To spend register and authentication.
- Log in and go to the “Derivatives” -> “Leveraged Tokens” section.
- Select the token you would like to trade. Now BTC, ETH, 1INCH, XLM, SUSHI, AAVE, BCH, YFI, FIL, SXP, UNI, LTC, XRP, DOT, TRX, EOS, XTZ, BNB, LINK, ADA. In each of them there are two position options: UP or DOWN, depending on whether you want to trade or drop prices.
- Click “Trade” and select a trading pair to go to the advanced trading center.
- You can do business here LT like other currencies, creating buy or sell orders.
If you already own leveraged tokens, you can redeem them by clicking the “Redeem” button in the “Derivatives” -> “Leveraged Tokens” section. The same page shows the transaction history.
Advantages and disadvantages
LBH
Conclusion
As the crypto market continues to evolve, there are many new tools for trading and investing in it. This allows new and experienced investors to choose the best investment options based on their risk tolerance and financial capabilities. Available tokens (Power token) is another promising tool that is already being appreciated by clients of popular cryptocurrency exchanges. If you want to try this option for yourself, read all the necessary information on the subject and understand the potential risks.