In order to understand how inverse tokens such as BTCSHORT work, it is important to first understand the risks of holding tokens which seek daily inverse performance.


BTCSHORT is an Ethereum-based inverse token that seeks to provide a notional exposure to the inverse or -1x the daily performance of Bitcoin on any given day. This means that if the price of Bitcoin increases by 5% in a day, BTCSHORT’s price will decrease by 5% in a day (before any fees or expenses are applied). BTCSHORT is strictly not a security, carries many risks, and is not suitable for risk-averse token holders and traders. This type of token is best suited for sophisticated, highly risk-tolerant token holders who understand and are comfortable with taking on the risks inherent to inverse tokens like BTCSHORT and understand the risks associated in holding tokens generally and inverse products in particular. In this post, we exclude all fees and expenses associated with BTCSHORT and holding Bitcoin for simplicity.

Explaining BTCSHORT

The main objective of BTCSHORT is to track -1x the daily performance of Bitcoin. The table below shows an example of how the price of BTCSHORT changes with changes in Bitcoin’s price over multiple days. We show three days of price returns and assume both BTC and BTCSHORT are indexed at $100.

As you can see, BTCSHORT does not track the performance of Bitcoin over the total 3 day period but instead its notional exposure to Bitcoin is reset at the end of each day (5 PM CET) which, in this example, gives a variance of 0.6% from a simple -1 x track of BTC over the 3 days.

This compounding effect can also lead to reduced performance in volatile periods as we show below.

Scenario Analysis

High Volatility, Flat Market

BTCSHORT will underperform in a volatile market. BTCSHORT provides exposure to -1x the daily performance of Bitcoin. If the token’s value rises on day one and then is followed by a loss of the same percentage amount on day two, the loss is applied to a larger amount than the gain. This means the token will lose more than it gained even if the price of Bitcoin ends up being the same after two days.

In a similar fashion, if the token’s value falls on the first day, then rises by the same percentage amount on day two. The token’s rise is applied to a smaller amount than the fall. This means that the token will again lose more compared to traditional shorting than it gained even if the price of Bitcoin ends up being the same after two days.

Volatility has a negative effect on token holders who hold the token for longer than a day as the table below shows.

Low Volatility, Markets Trending Downwards

If the Bitcoin price is stable but trending in a negative direction, then BTCSHORT’s multi-day performance will benefit. This is because daily returns of the token are compounded (i.e. daily profits are automatically rebalanced at 5 PM daily) and gains made on one day will benefit from gains made on previous days.

Low Volatility, Markets Trending Upwards

If the Bitcoin price is stable but trending in a positive direction, then the BTCSHORT performance will falter but less than it would’ve had there been no compounding. Losses made on one day will be, because of previous losses, applied to a smaller amount. This means that compounding will lead to slightly reduced losses than if there were no compounding.


BTCSHORT offers a notional exposure to -1x the daily performance of Bitcoin. It is crucial that all token holders understand how compounding and the daily rebalancing of the token affects performance, especially in volatile markets. The tokens are designed for holding periods of equal or less than one day and holders need to consider their holdings each day.


This document has been prepared and issued by Amun Limited (“Amun”). This document may contain market commentary. All information used in the publication of this document has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this document or the information contained/referenced herein.

This document may contain independent market commentary prepared by Amun based on publicly available information. Although Amun endeavors to ensure the accuracy of the content in this document, Amun does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this document make no warranties or representation of any kind relating to such data. Where Amun has expressed its own opinions related to product or market activity, these views may change. Neither Amun, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this document or its contents.

Crypto asset trading involves a high degree of risk. The crypto asset market is new to many and unproven and may have the potential to not grow as expected. Currently, there is relatively small use of crypto assets in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in crypto assets. In order to participate in the trading of crypto assets, you should be capable of evaluating the merits and risks of the investment and be able to bear the economic risk of losing your entire investment.

Nothing in this document (or any other documents mentioned herein) is or should be considered to be an invitation to enter into an investment and is not intended to be an offering of securities in any jurisdiction nor does it constitute an offer or an invitation to sell shares, securities or rights belonging to the Issuer or any related or associated company. This document has not been registered with or approved by any regulator in any jurisdiction. Readers are cautioned that any historical performance information or forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results or performance may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax, or other advice and users are cautioned against basing undue reliance, investment decisions or other decisions solely on the content hereof.

Any historical performance included in this document may be based on back testing which is a means of evaluating a particular strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested performance is purely hypothetical and is provided in this document solely for informational purposes and neither represents actual performance nor should it be interpreted as an indication of actual or future performance.

The Tokens are complex products which incorporate a high degree of risk and should only be bought or traded in by persons with appropriate technical knowledge who have experience with similar products.

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