Bitrue has just added support for Exchange Traded Funds
What are ETFs?
An Exchange Traded Product (ETF), which tracks a certain multiple of the target asset's rise and fall every day. Users do not need to pay for the collateralized assets to achieve the effect of leveraged trading on the underlying assets and the product has no expiration date and no risk of liquidation, but there is a risk that the net value is close to zero. You can identify the multiple of the product and the direction of either long or short, by the name of the ETF.
XRP3L: Is 3x long XRP. When the price of the underlying asset increases by 1%, the net value of the product will increase by 3%.
XRP3S: Short XRP 3x. When the underlying asset drops by 1%, the net value of the product will increase by 3%.
XRP1S: Short XRP is 1x. When the underlying assets fall by 1%, the net value of the product rises by 1%.
Identity Authentication Requirements:
Due to local laws and regulations, the following countries and regions are temporarily unable to trade ETF products, including Belarus, Myanmar, Congo, Cuba, Hong Kong(China), Iran, Iraq, Côte d’Ivoire, Japan, Liberia, North Korea, Sudan, Syria, Turkey, the United States, Zimbabwe
1. ETF pricing mechanism
Net worth calculation:
Net worth = basket position * underlying asset price + basket loan
Basket position = the number of underlying assets held by each ETF
Basket loan = the number of loan coins held by each ETF
For example: XRP3L, if the basket position is 3XRP, the underlying asset price is 100U, and the basket borrowing currency is -200U, then the net value=3*100-200=100U
2. Calculating the actual leverage of an ETF
ETF leverage ratio = basket position * underlying asset price/net value
For example: XRP3L, if the basket position is 3XRP, the underlying asset price is 100U, and the basket borrowed currency is -200U, then the net value=3*100-200=100U
The actual leverage of ETF=3*100/100=3
3. ETF's position adjustment mechanism
An ETF is divided into two types: Regular Position Adjustment and Specific Position Adjustment. Regular Position Adjustment means that the platform will rebalance the position at a fixed time every day to ensure that the ETF is at the agreed multiple of leverage at the beginning of each day. Specific Position Adjustment refers to the temporary adjustment when the actual leverage of ETF exceeds a certain level in a day, and after the adjustment, the leverage is at the agreed multiple.
The specific repositioning process is as follows:
Assuming that each XRP3L represents 3 XRP and -20,000USDT, when the price of XRP is 10,000USDT, the net value of XRP3L is 10,000USDT (3*10,000USDT-20,000USDT). In fact, the position of each XRP3L is 3*10,000USDT. Therefore, its leverage is 30,000USDT/10,000USDT=3 times. When the price of XRP rises to 11,000USDT, the net value of XRP3L becomes 13,000USDT, and each XRP3L position becomes 3*11,000USDT which means the leverage is 33,000USDT/13,000USDT=2.54 times, i.e. 3 times lower than the target leverage, so you need to buy XRP to achieve 3 times leverage.
The position to buy is:
target position-current position=3*13,000USDT-33,000USDT=6,000USDT, the number of XRP bought is 6,000/11,000=0.54XRP.
4. Holding Limit
That is if the amount to be purchased + the current holding amount> the maximum holding amount.
5. Order price limit with NAV
- Buy order: The price set for a limit order and the price for a market order can't be higher than 5% of the net value.
- For example: If the net value reports 10 USDT, the price set for a limit order and the price for a market order can't be higher than 10.5 USDT (105% of the net value), .
- Sell order: The price set for a limit order and the price for a market order can't be lower than 5% of the net value.
- For example: If the net value reports 10 USDT, the price set for a limit order and the price for a market order can't be lower than 9.5 USDT (95% of the net value) .
Risk Reminder : There is a possibility that the NAV of ETF can become zero or the product will be removed due to inherent market risks, high fees, slippage, rebalance algorithm frontrunning and any other perceived unknown risks associated with ETF