On March 3, 2021, KuCoin, an IDG-backed crypto exchange, announced that its leveraged tokens have been made available for beta test. The first batch of leveraged tokens to be introduced are BTC3L, BTC3S, ETH3L and ETH3S, and invited users will be able to trade the tokens in the KuCoin Sandbox. The feature will be officially launched in the middle of March.
Leveraged tokens are a new type of crypto derivative without any due date. Its trading experience is quite user-friendly as it’s essentially the same as trading in the Spot market. Compared to perpetual contracts on KuCoin Futures, traders of leveraged tokens can also amplify their investment returns with leverage. While the biggest advantage of leveraged tokens is that they will never be liquidated.
Take the BTC3L and BTC3S, for example: the underlying asset is Bitcoin (BTC) and both leveraged tokens have been applied with 3 times leverage. It means that when Bitcoin’s price increases by 1%, the net value of BTC3L will increase by 3%, whereas that of the BTC3S will drop by 3%.
KuCoin Global CEO Johnny Lyu stated, “As an innovative derivatives product, KuCoin Leveraged Tokens have unique features, such as zero margin fees and no risk of liquidation. With the launch of this service, KuCoin will give users easier access to more advanced investment tools. Next, KuCoin Leveraged Tokens will support more top coins like LTC and trending coins in the DeFi field or Polkadot ecosystem, complementing KuCoin’s ecosystem as a leading crypto trading service provider.”
As a derivative product that has been well developed in the traditional financial market, leveraged tokens are suitable for a large majority of crypto investors. The product is particularly tailored for investors who want to make a profit from the market volatility but do not want to bear the risk of liquidation.
Based on the example given by KuCoin, if the Bitcoin price rises 10% for four consecutive days, the theoretical return of BTC3L on KuCoin can be 185%, more than 3 times higher than the gains in the Spot market.
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