Financial markets, may it be the crypto market, stocks, or forex market, are a scary place to be, especially if you are a beginner and you do know what you are doing. There are a lot of opportunities swinging by you at each of these financial marketplaces, especially the crypto market, but if you don’t have the knowledge or can’t approach those opportunities when the time is right, then it is as if you have done nothing.
Stock and forex markets have matured over a long time ago, these are now in that particular state where opportunities are kind of a hit and miss, and products and offerings are pretty lean.
The crypto market, on the other hand, is providing you a bang for your buck because of the fact that it is still a very new concept and hasn’t matured into an entirely substantial financial market; it would still require time to do that. The number of opportunities here is limitless, you’ve got tons of products that you can buy or invest your money into.
To start off, you have non-fungible tokens, these are the digital art pieces that can be sold either individually or as a unit; you have got cryptocurrencies that you can trade and earn a handsome profit if you wish to stake them in a dedicated mining pool for a particular amount of time, then there are the decentralized apps that you can develop and make a huge sum of money if it is really something that people want and tons of other products and opportunities are also present.
There are different trading types that you can get into, there is a direct investment option where you can put your money into a particular cryptocurrency, and you see it mature, and once it has matured, you can chip in to dissolve your liquidity and get a handsome profit on your original investment, but if you are not comfortable with direct investment options, then you must know that there is leverage trading as well.
Today we will especially be talking about leveraged tokens introduced by the Binance crypto exchange that allows you to have exposure to very price value of a particular cryptocurrency without facing risk of liquidation.
When you buy cryptocurrencies directly, you might not be able to liquidate them, especially if too many people are buying that specific crypto and a certain threshold has passed where that cryptocurrency has not yet shown returns, then liquidation can be a real problem.
With the help of leveraged tokens, you would be able to bask in the glowing beam of enhanced profits because of the leveraged product that you have invested in. It means that you don’t have to worry about collateral, bang your head over margin requirements; of course, as told earlier, there is absolutely no risk of validation at all.
It was the derivatives exchange FTX that first came forward with the idea and initial design of a leveraged token. If you are even remotely associated with the crypto market, then you must know that leveraged tokens are a highly anticipated and debated topic within the market because these won’t perform as handsomely or efficiently as you would want them to, especially if you are going into this game on a longer basis.
Binance leveraged tokens, on the other hand, have a completely different design which makes the whole idea of trading with leveraged tokens a delight with enhanced profitability, not having to worry about liquidity, and various other added benefits as well.
What are Binance Leveraged Tokens?
Have you ever heard of the Binance blockchain network? Of course, you would have, as it is the largest crypto exchange out there, providing tons of opportunities in terms of direct or leveraged investments for various cryptocurrencies.
The Binance leveraged tokens are some of the most elegant tradeable assets present on Binance’s spot market. Each and every token presents you with a full-throttle of multiple open positions over the futures market.
So, with the new Binance leveraged tokens within your hand, you are actually holding a specific asset that will allow you to get the enhanced version of the future leveraged positions. Some of the most elegant leveraged tokens on Binance are BTCUP and the BTCDOWN.
As evident from the name is representative of leveraged games for the price of Bitcoin when it goes up, whereas the other one focuses on the gains from Bitcoin when the price is going down.
You can put your money into any dedicated position, and this should be reflective of what you originally think about the performance of Bitcoin in the crypto market; whatever the outcome will be, there is a 50% probability that you will earn a profit, and there is a 50% probability that you would have to take a loss, about the best probability score the crypto market has ever handed out.
As of today, these leveraged tokens are present on the Binance crypto exchange, and that is the only place you can interact with or use them to put your money into a dedicated leveraged position over the blockchain.
You can convert these tokens into any other cryptocurrency you want using the on-chain technology of the crypto exchange itself, but you cannot withdraw these tokens in their primitive form into your own wallet or any other address at all.
Another thing that you must be aware of is the fact that these tokens are not issued directly over the chain, which means that it is a slip and miss opportunity; you really have to be an active member to get your hands on these tokens, which would allow you to make further trades and explore many other opportunities that are made available within the market for leveraged trading.
Working of Binance Leveraged Tokens
Next up, the working of these leveraged tokens is discussed; one of the key differences between Binance Leveraged tokens and any other leveraged token or entity up there is that it doesn’t maintain leverage constantly.
Now you might be thinking that if it doesn’t hold constant leverage, then what is the deal here? What is the angle? Instead of going or rooting for constant leverage, it targets variable leverage streams.
It means that you have the ability to earn more profit on your original investment, but it might not be the same down the line, and you might have to take up a few losses, not in terms of an actual loss on your investment where the value of the investment has backfired but a substitution loss where you are not able to earn as much profit as you were a couple of months back.
This is what variable leverage sounds like; if the conditions are right and the market is performing great, then you can only think that your profits are going to double down, but on the other hand, if the market is in a bit of stress then your profit is not going to be as remarkable as it once was, but the good thing is that you are still getting some sort of profit on your investment and that is always a win-win in any financial market out there.
You would also be overjoyed at learning the fact that this thing is put into place to make sure that your gains could be increased, whereas reducing or minimizing the risk of liquidation once prices on your investment go under. You won’t be able to find this target leverage anywhere, neither on paper nor on the website of Binance, because it isn’t public.
The main reason why is so is to stop frontrunning; if people could just see the value of the profit and the thick margin that is being tossed on the investment which they are going to make shortly, then they would be scaling up their investment accordingly which is not the right way to play the game or a fair way if you must.
This way, big traders could take advantage of the small ones who don’t have the capital required to sit on the big table, and that is the reason why this variable leverage position has not been disclosed publicly.
You won’t also be required to rebalance your investment just because the leverage is once again going to change unless, of course, the market requires it; then, you have to rebalance in terms of either putting more investment down on your original one or liquidating some of the stuff if need be.
As explained earlier, these leveraged tokens are currently being traded over the gyroscope market. You can also redeem these tokens at their face value if you are in need of liquidation and want to get out of whatever investment or opportunity you were exploring with these tokens.
A redemption fee needs to be paid in such an event, but if you want to take the word of the wise, then it is better to just exit your position right then and there in spot market rather than opting for this redemption process because, in the long run, it is going to cost you more time, money and focus as these are the very ingredients of success and should be spent elsewhere.
This is the main reason why experts would always debate with you to exit your position on spot market rather than opting for a redemption event.
Are you feeling tempted yet to check out this product and double down on your investments? The chances are that you are already tempted and will check out this product later. Whenever you do so, you will see a term over the page of leveraged tokens by the name of the Net asset value. This showcases the present value of your leverage tokens in USDT.
So, in a way, when you are done with your investment opportunity and want to close your position, you would have to exchange your tokens for USDT, and the value that you will receive would be detected by the net asset value of your investment and the leveraged tokens which you have held all this time.
Why Should You Consider Using Binance Leveraged Tokens?
There are many other leveraged tokens out there, so why should you opt for Binance Leveraged trading? What is so special about it apart from the fact that it allows for variable leverage? It is because it doesn’t get tainted with volatility drag as much as other tokens do. Volatility drag is a concept popular among crypto enthusiasts, and this is the very reason why people steer clear of leveraged tokens in general.
This is a phenomenon that records the overall negative effect volatility has had on your investment over a particular period of time. We are not talking about inflation here, so those of you who were thinking that inflation is the culprit here really need to point your sky glasses towards the volatility track.
Inflation does play a role when it comes to diminishing the profits and the overall value of an asset over a certain period of time, but volatility is worse because it is a sudden change in the value of the asset, and if the markets are down and are not performing to their fullest this could literally end your game within the crypto market for good.
If the volatility drag is massive and the amount of time for which you have staked your investment into a particular asset has also been stretched, then you can only presume that your profits are going to get slimmer and slimmer with every passing day.
A leverage token is going to perform beautifully when the market is in full swing and all the variables of the equation are booming with opportunity; you are going to receive strong returns on your investment, but that can’t be said in a market where things are opposite.
Binance, on the other hand, has programmed their leveraged tokens in such a way that they endorse variable leverage; as discussed earlier, you are not sure about the overall returns you are going to receive on your investment because the whole system is variable.
It is going to change and fluctuate with time; suppose that at a certain period of time, you were seeking a handsome profit on your investment regarding leveraged tokens, but as time passed, your profits began to get a bit slimmer but with another momentum that market took your profits were back to where they are supposed to be. This is the rebalancing effect of Binance leveraged tokens that no other leveraged token out there provides you with.
This way, you can really see yourself staking away your investment into a particular asset or deal proposed by Binance leveraged tokens because you are going to receive valuable profit on your investment like no other leveraged token up there is currently providing you.
How to Buy Leveraged Tokens
As explained multiple times before, these leveraged tokens are only present on the Binance crypto exchange, and you won’t be able to find them anywhere else, so the thing is you need to create a Binance account if you haven’t already and then continue with the process of buying and redeeming these tokens.
You must also know that these tokens are currently listed on Binance’s spot market just like any other token or coin that is offered on the crypto exchange but you would have to cover all the way to trading interface and there you would find these under the ETF button.
This will help you to avoid any and all confusion and truly provide you with a categorical approach when it comes to tradeable assets.
The page of leveraged tokens could also be found at the top bar of the Binance website, and as for purchasing these tokens and redeeming them, you need to follow some steps before you can do that.
The first step is to log on to your Binance account, and if you haven’t done so already or developed an account in the first place, then you need to do that at your earliest convenience. Once you have verified your account and everything is up to order, you need to pick leveraged tokens from the derivatives option over the top bar of the website.
Then you would have to select the Binance leveraged token pair that you feel comfortable trading in, and that will land you at the very page for that specific token that you have selected. Once you click to buy, you will be redirected to the trading interface. There you would have to actually punch in how many of these tokens you would like to buy and what specific method you are comfortable using for the sake of paying for all of this stuff.
It is advised that you proceed further with caution and read the disclaimer, which basically states that you are above 18 years of age and concur with the terms and conditions of the Binance crypto exchange.
You need to click that box in order for the website to know that you have read the disclaimer and you agree to the above-mentioned terms and conditions; once you have done that, simply click continue. Once you are done with all of that, you will now be able to create these Binance leveraged tokens just like you create any other tokens or crypto assets over the Binance crypto exchange.