Binance Leverage Tokens – Summary
➤Binance Leveraged Tokens represent a basket of perpetual contract positions.
➤The price of the tokens tracks the change in the notional amount of the perpetual contract positions in the basket and alterations in the multiples of leverage level.
➤With the Binance leveraged tokens, you can go long and short on Binance.
Unlike crypto leveraged trading, you could get into a leveraged position without collateral, maintain margin maintenance and worry about the liquidation risk.
Binance Academy – Leveraged tokens
In the video below, you can see how Binance Academy describes leveraged tokens. Binance Academy is the free crypto educational platform launched by Binance.
How to start trading with Binance Leverage Tokens?
First, you must sign up with Binance and create an account.
After you have created an account with Binance, Login to your account and follow these instructions.
- Go to Derivatives in the header menu and click on Leveraged Tokens on the drop down menu.
- Here, you can switch between listing your tokens and all available tokens. In this screen, all tokens are selected
- Name of the leverage token. From the name you can see the direction as well (DOWN or UP)
- NAV, Net asset value, refers to the price of a leveraged token
- Real leverage – Since the leverage is variable this represent the current leverage
- Last price, last traded price
- 24h change, change in % for the last 24h
- Trade, Subscribe and Redeem – Trade is on the spot market, while subscribe and redeem is against liquidity provided by Binance (this is usually at a higher price).
What is the leverage level of Binance Leveraged Tokens?
Its very important to understand that Binance leveraged tokens do not maintain a constant leverage, like most other leverage trading instruments.
Instead, Binance leveraged tokens maintain a variable leverage between 1.5x and 3x.
Since Binance leveraged tokens are not forced to maintain a constant leverage, they can rebalance under extreme market conditions to maximize profits and minimize losses.
The rebalancing of positions of Binance Leveraged Tokens is governed by Binance’s proprietary algorithms with the aim to maximize correlation between Binance Leveraged Tokens and the underlying margin-leverage position without a profit-guarantee.
Binance Leverage Tokens Pros and Cons
- No liquidation risk
- No collateral
- No maintaining margin maintenance
- Variable leverage
- Complicated fees system as you can see below
- Not for long-term investment (As for any leveraged product)
Binance Leverage Tokens Fees
There are several different fees associated with Binance leverage tokens. You must be aware of those fees before you start trading since they will impact your trading result.
You can either buy leverage tokens in the market and pay trading fees or you can subscribe and “buy” from Binance. The default fees are the same but the subscription supply is limited per day. You don’t pay both fees. The same goes for sell in the market and redemption of leveraged tokens. You pay one of the fees and not both of them.
Binance Leveraged Tokens Risks
As with all investments, there are risks associated with Binance leverage tokens.
There is always a risk that the value of any investment, including Binance leverage tokens, can become zero (0) and cannot not be recovered due to inherent market risks, high fees, slippage, rebalance algorithm frontrunning and any other perceived unknown risks associated with Binance Leveraged Tokens.
Also, remember that leverage trading, including Binance leverage tokens, are NOT invented for long term investments because of the volatility decay.
Liquidity and pricing risks associated with Binance Leveraged Tokens
Because Binance provides liquidity to the leveraged tokens, there is a daily total redemption limi of each leveraged token at 100.000 token.
Users can only redeem 1.000 tokens per account, per day. However, it will generally be more expensive to redeem than rather than selling them on the spot market. Binance recommends to sell in the spot market as your first option, especially during normal trading times.
How to trade Binance Leveraged Tokens from the Binance app?
You can also trade Binance leveraged tokens form the Binance app.
Just click in the following order to get to this screen.
- Markets in the footer menu
- ETF in the second header menu (as you can see in the screenshot)