The Reason Binance Delisted FTX Leveraged Tokens

[cryptobaro]

Leveraged tokens are an imitation of directional ETFs. Leveraged tokens track percent movements rather than value change, and there is plenty of evidence that they will depreciate extensively.

Leveraged tokens are new in Crypto, but there stock market counterparts have been around for many years.

The long-term problem of leveraged funds/tokens is more visible in long-standing stock market products.

Here is an example how much money would be left if you were trading in Spot / 3x Margin and FTX Bull Tokens.

I guess it is normal that people lost so much money by trading those FTX tokens, I really wonder how it is calculated...



Source: Dao Maker

[logfiles]

I guess it is normal that people lost so much money by trading those FTX tokens, I really wonder how it is calculated...

The difference between them and perpetual futures is the Rebalance time.
FTX Leveraged Tokens rebalance every day around mid night UTC, so you won't see the same kind of gains of losses as seen in Perpetual contracts. In other words
"every day each leverage token reinvests profits if it made money.  If it lost money, it sells off some of its position, reducing its leverage back to 3x in order to avoid liquidation risk."
To get a full understanding of how the profits or losses are calculated check out this useful article: https://help.ftx.com/hc/en-us/articles/360032509552-Leveraged-Token-Walkthrough-READ-THIS-S-

[cryptobaro]

I guess it is normal that people lost so much money by trading those FTX tokens, I really wonder how it is calculated...

The difference between them and perpetual futures is the Rebalance time.
FTX Leveraged Tokens rebalance every day around mid night UTC, so you won't see the same kind of gains of losses as seen in Perpetual contracts. In other words
"every day each leverage token reinvests profits if it made money.  If it lost money, it sells off some of its position, reducing its leverage back to 3x in order to avoid liquidation risk."
To get a full understanding of how the profits or losses are calculated check out this useful article: https://help.ftx.com/hc/en-us/articles/360032509552-Leveraged-Token-Walkthrough-READ-THIS-S-

Does this also mean these bull or bear tokens need to move in a bull or bear trend, like for 2-3 consecutive days, in order to give profit? Oh well maybe people thought those FTX were the same as 3x Margin.

[logfiles]

Does this also mean these bull or bear tokens need to move in a bull or bear trend, like for 2-3 consecutive days, in order to give profit? Oh well maybe people thought those FTX were the same as 3x Margin.

You can gain profit even after day one... also if the bull run(for FTX bull) or Bear run (for FTX bear) goes for 2 or 3 day without the price going in the opposite direction past the position you entered. You will  make more profit as compared to the actual 3x perpetual contracts position as shown in the picture you posted in day 2, 4 and 6 because your profits will automatically be reinvested.

The problem comes when the price moves in the opposite direction of your token. It will automatically sell of some of your position you entered or which was automatically reinvested to prevent your assets from getting liquidated thus that is why you will make losses even when the price goes back to 5000

[cryptobaro]

Does this also mean these bull or bear tokens need to move in a bull or bear trend, like for 2-3 consecutive days, in order to give profit? Oh well maybe people thought those FTX were the same as 3x Margin.

You can gain profit even after day one... also if the bull run(for FTX bull) or Bear run (for FTX bear) goes for 2 or 3 day without the price going in the opposite direction past the position you entered. You will  make more profit as compared to the actual 3x perpetual contracts position as shown in the picture you posted in day 2, 4 and 6 because your profits will automatically be reinvested.

The problem comes when the price moves in the opposite direction of your token. It will automatically sell of some of your position you entered or which was automatically reinvested to prevent your assets from getting liquidated thus that is why you will make losses even when the price goes back to 5000

Thank you for this explanation, I was wondering how you could lose that big when the market is going the other way.. No that makes sense. It is really risky as I have understood, especially in this highly volatile market.

[Tytanowy Janusz]

There was so much hate. I've seen people attacking CZ under every tweet calling him scammer because of those FTX tokens. That's why they had to desist them. Later CZ said that it is not their job to educate traders, that FTX tokens ware the most traded tokens, delisting them was very hard decision but reputation and trust is more important than money. Majority of FTX tokens traders was not ready for such hard to understand asset.

Just see this:

initial investment 1000$
first day -20% and you have 800$
next day +25% and you have your 1000$ back

same situation but with FTX token
initial investment 1000$
first day -20% (x3 = 60%) and you have 400$
next day +25% (x3 = 75%) and you have 700$ -how is it possible that you are -300$ when price of base asset is where it was during your investment? Well that's how it works. It is not an asset to hold and not an asset for beginners - definitely not for those who does not see difference between them and margin - definitely not for average crypto trader.

[cryptobaro]

There was so much hate. I've seen people attacking CZ under every tweet calling him scammer because of those FTX tokens. That's why they had to desist them. Later CZ said that it is not their job to educate traders, that FTX tokens ware the most traded tokens, delisting them was very hard decision but reputation and trust is more important than money. Majority of FTX tokens traders was not ready for such hard to understand asset.

Just see this:

initial investment 1000$
first day -20% and you have 800$
next day +25% and you have your 1000$ back

same situation but with FTX token
initial investment 1000$
first day -20% (x3 = 60%) and you have 400$
next day +25% (x3 = 75%) and you have 700$ -how is it possible that you are -300$ when price of base asset is where it was during your investment? Well that's how it works. It is not an asset to hold and not an asset for beginners - definitely not for those who does not see difference between them and margin - definitely not for average crypto trader.

It is true that noone should hodl these ftx bull bear tokens, it seems so dangerous after seeing how your fund changes even if the price is the same.

Delisting them is good for non-pro traders like me actually 

[ButSa]

FTX Exchange

[BitcoinTurk]

Although Binance seems to consider its users in the process of removing this pair, I actually think that this is not the main reason. According to some reports that I have read in the last few days, Binance is preparing to list this new token. In other words, it was very likely that the experiment was made with FTX tokens at the first stage and now Binance aims to gain power in this field by listing the tokens it will create. Personally, I don't think that usually such great services will make special improvements just for users. As I mentioned in the invisible part of this event, a situation that will have the advantage of Binance will surely happen or it happened without us noticing.

[BlacksmithCorporation]

I think the FTX tokens are delist because the way they work is too complicated for normal traders, but those traders mistakenly think they are similar to margin trading, and that makes them lose.

[rexxarofmoknathal]

I'm surprised they listed products from a competing exchange at all, doesn't really make sense from a business perspective.

In any case, leveraged tokens are quite a difficult concept to understand, and neither FTX nor Binance did a good job of explaining them. Understandably this has led to plenty of noobs getting rekt investing in these tokens.

Hopefully they'll bring back something more transparent instead.

[nelson4lov]

Binance did the mistake to introduce leveraged tokens like ETHBULL, ETHBEAR and others to their platform without providing adequate information about the risks that leveraged trading pose. A couple of my friends started playing with leverages. It seemed promising since their trade was going well but the dip in Bitcoin around the end of April put them in a really deep loss. They didn't know that losses will happen as fast as it pumps. Even slight drops in prices turned to hug losses thanks to leverages.

[SolarWindMiningCompany]

I think the FTX tokens are delist because the way they work is too complicated for normal traders, but those traders mistakenly think they are similar to margin trading, and that makes them lose.

OP did a good job in buttressing the reasons why Cz delisted FTX tokens but more confusing is the fact that CZ still went ahead to list binance native tokens which are similar to what he claims hurts traders. Is there really much to think about the move? I guess only CZ has the factual detail of the answer because I only see profits here

[SolarWindMiningCompany]

I'm surprised they listed products from a competing exchange at all, doesn't really make sense from a business perspective.

In any case, leveraged tokens are quite a difficult concept to understand, and neither FTX nor Binance did a good job of explaining them. Understandably this has led to plenty of noobs getting rekt investing in these tokens.

Hopefully they'll bring back something more transparent instead.

I am not an insider but on my own opinion I will say Binance delisted FTX leverage tokens strictly because of business. I don't buy his reasons for the action and for him to claim is a noble gesture bewildered me

[Tytanowy Janusz]

I'm surprised they listed products from a competing exchange at all, doesn't really make sense from a business perspective.

USDT is bitfinex product and is listed everywhere. BNB is a chain that enables S-C, DAPS and binance still list ETH, NEO and other similar to their product coins. It is quite normal. The only thing that exchanges avoid is listing other exchanges main coins (BNB. KCS, LEO, HT).

According to what CZ said FTX tokens were the most traded tokens on their exchange. Volume=fees. And from business perspective this makes huge sense. And from business perspective FTX tokes were like another stable coin that is stable to BTC * multiplier. Just another USDT - bitfinex token that people like to trade with.