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Analysis

Part 1: Introduction to Crypto Leveraged ETF

by Erina Azmi -

Disclosure: The content is strictly for your general information only. No part of the content that we provide constitutes financial advice, legal advice, or any other form of advice meant for your specific reliance for any purpose. Any use or reliance on our content is solely at your own risk and discretion.

Traders often think they can beat the market. 

Truth is most failed to do so, and your next best bet is probably to invest in an Exchange Traded Fund (ETF). For those who are interested in decentralized ETF, you can read my analysis here.

Nonetheless, one of the traders’ idiosyncrasies is they are always on the lookout to maximize their profit with different means such as leverage. For some, investing in an ETF may be too vanilla for their investment preference. If you don’t know what leverage is, I encourage you to read Leverage 101 - A Short Primer by Hasu.

Leveraged ETF might be a better product fit for those looking for compounding returns in a shorter time frame, specifically those seeking daily returns.

However, is leveraged ETF as simple as it seems, or is there any hidden pitfall?

We will discuss all about it in our two-part crypto leveraged ETFs series: 

  • Part 1: Introduction to leveraged ETFs
  • Part 2: Deep dive into decentralized leveraged ETFs

What you can expect from the first part of the series is a short primer on leveraged ETFs, and the subject will focus on the centralized crypto leveraged ETFs such as those issued by FTX, Binance, and Gate.io

In the second part, we will explore the decentralized leveraged ETFs - the Flexible Index Tokens (FLI) tokens from Index Coop. Once we have covered the basics, we will evaluate the key difference between centralized and decentralized leveraged ETFs.

In this article, you will learn the basics of leveraged ETFs: 

  • Types of leveraged ETFs
  • How rebalancing works
  • Profit and loss calculation
  • The shortcoming of leveraged ETFs: Volatility Decay
  • Associated fees
  • Why should you trade leveraged ETFs 

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