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Leveraged tokens (LTs) allow traders to have a secure leverage exposure on assets, but there are nuances…
My latest research focuses on the history of these tokens and how FTX and Binance versions work.
As usual, a few thoughts here:
Conversation
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Although leveraged ETFs from TradFi have inspired LTs, the way to get exposure is entirely different.
LTs use perpetual swaps that allow traders to create positions with 100x+ leverage.
In fact, LT is a leveraged perp position that exchanges manage for traders.
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A thing that LTs traders often overlook is that tokens provide the promised profitability only between rebalancings.
LTs aren’t meant for long term holding unless you are very confident in a continuous directional move, which is apparent from this chart.
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Alameda was a pioneer in LTs, having created them even before FTX launch.
Among all token variants, BULL (3x) and BEAR (-3x) versions are most often traded.
However, trading volumes for FTX LTs are relatively low.
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this graph shows binance leverage tokens not ftx, would be interested to see when you say binance is "much higher" what the magnitude is..
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thanks
interesting -- like a factor of 10.
goes to show how successful Binance's strategy of ripping off products works well. invented the ETF token!
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10x volume, similar OI
interesting -- not really sure why that's the case
vol/OI is my favourite initial BS detector on derivatives too (used on bitcoinfuturesinfo.com/market-share-a )
didnt look at the LT vol:OI though, interesting observation indeed
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My theory was just way more aggressive market making but maybe not
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more aggressive market making + tighter arb trades vs local spot