Our leveraged tokens — BTC3L, BTC3S, ETH3L, and ETH3S
We currently have four leveraged tokens available:
- Amun Bitcoin 3x Daily Long (BTC3L): Available on Jasper and Liquid
- Amun Bitcoin 3x Daily Short (BTC3S): Available on Jasper and Liquid
- Amun Ethereum 3x Daily Long (ETH3L): Available on Jasper and Liquid
- Amun Ethereum 3x Daily Short (ETH3S): Available on Jasper and Liquid
How do leveraged tokens work?
Leveraged tokens are intended to maintain long 3x or -3x exposure to cryptoassets such as Bitcoin or Ether. This means that if Bitcoin increases by 3% in a single day then a long leveraged token like BTC3L will increase by 9% and conversely a short leveraged token like BTC3S will decrease by 9% on the same day. Let’s take a very simple example; what would happen to the prices of BTC3L and BTC3S if Bitcoin’s price over 3 days is as follows: Day 0 — $100, Day 1 — $103, Day 2 — $106.09, in other words two days of Bitcoin increasing by 3%. We assume that Bitcoin, BTC3L, and BTC3S all begin day 0 at a price of $100.
As we can see, both BTC3L and BTC3S track 3x and -3x of Bitcoin’s returns over a single day. Please note that these tokens do not track 3x or -3x of Bitcoin’s returns over multiple days. For example, it’s easy to see that the two day return of BTC3L (18.81%) is actually more than 3x of Bitcoin’s (6.09%) and the two day return of BTC3S (-17.19%) is actually less than -3x of Bitcoin’s. This phenomenon is due to the compounding of our inverse and leveraged tokens and can be beneficial in situations where the market is following a trend but harmful in periods of mean reversions. The following example shows how the tokens would perform in a mean-reverting market. Here Bitcoin’s price moves as follows: Day 0 — $100, Day 1 — $103, Day 2 — $100, in other words Bitcoin increases by 3% on day 1 and then decreases by 2.9%.
These examples illustrate the purpose of holding leveraged tokens for a period of one day and not longer. Over longer days, due to compounding, they do not maintain their level of leverage exposure to Bitcoin’s long term returns.