CoinW ETF Introduction
Th Introduction of ETF
ETF is a spot leveraged product that doubles long or short digital assets to obtain multiple profits or losses. For example, for every 1% increase in ETH, the net value of ETH3L increases by 3%, and the net value of ETH3S decreases by 3%. Unlike leveraged trading or contracts, users do not need collateral , but this product fluctuates greatly, please pay attention to controlling risks.
Two sentences to understand ETF
- Compared with the spot, the same assets can get 3 times profit.
Behind each ETF product is a corresponding spot leveraged position. For example, ETH3L corresponds to long ETH by the 3 times spot leverage; if a user buys 1 share of ETH3L/USDT, the bottom layer of the system will correspond to 3 shares of spot leveraged ETH/USDT long positions, so as to achieve 3 times profit in a unilateral rising market .
Note: ETF are more suitable for unilateral market trends, and may face net worth wear in volatile market conditions. Net worth losses may be more when intraday volatility is severe, so you need to pay attention to risk control.
- System automatic adjustment mechanism
Taking ETH3L/USDT as an example, the system will increase profits and reduce losses for the spot leveraged positions corresponding to the bottom layer of the ETF through daily position adjustment. This ensures that the underlying asset position corresponding to the user’s ETH3L/USDT is always in a leveraged state of 3 times;
ETF are divided into two types: timed position adjustment and irregular position adjustment. Among them, timed position adjustment means that the platform will rebalance the position at a fixed time every day to ensure that the ETF is at the agreed multiple leverage at the beginning of each day; Irregular position adjustment refers to the temporary position adjustment when the actual leverage multiple of the ETF exceeds a certain level during the day, and the position adjustment will be at the predetermined multiple leverage after the adjustment.
Further reading:
The following examples shows ETF products’ performance under different market conditions,
1.Amplify profit and loss
Taking ETH as an example, if ETH rises by 5%, then ETH3L will generate 15% profit. For details, please refer to the following table:
2.Unilateral market, rise more, fall less
Taking ETH as an example, assuming that ETH rises by 5% every day, the cumulative increase after 3 days is 15.76%, the cumulative increase in the net value of ETH3L is 52.09%, and the cumulative decrease in the net value of ETH3S is -38.59%. For details, please refer to the table below:
3.Volatile market resulting in wear and tear
In the market, if the rise and fall of ETH in 4 days is 5%, -5%, 5%, -5%, the cumulative rise and fall is -0.5%, and the cumulative rise and fall of ETH3L’s net value is -4.45% , higher than -0.5%*3=-1.5%. Therefore, under volatile market conditions, ETF products may experience net value wear and tear.
[1] ETH cumulative rise and fall = 105%³-1=15.76%
[2] Under the volatile market, the cumulative rise and fall of ETH=105%*95%*105%*95%-1=-0.50%
[3] Under the volatile market, the cumulative rise and fall of the net value of ETH3L = 115%*85%*115%*85%-1=-4.45%
Risk warning:
ETFs are highly volatile, and due to inherent market risks, slippage, position adjustment algorithms, and any unknown risks associated with ETFs, the net value of ETFs may return to zero or products may go offline. Please pay attention to check the net value before trading. Under extreme market conditions, the product will have the risk that the price will approach zero and the price will be far away from the net value. Investors should pay attention to controlling risks.
