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Author Topic: let's discuss about Binance Leveraged Tokens (BLVT)  (Read 131 times)
niccolo_21 (OP)
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May 04, 2021, 08:14:59 PM
 #1

today I closed a position opened some days ago on BTCDOWN/USD BLVT.

Despite all the warnings about the product (given in some cases by binance itself) the trade executed with no surprises, as I started to suspect at some point, based on what I had read.

There's still something not very clear about this product to me though, so I would like to discuss doubts and questions with those who may have direct experience with it or may be just those who, like me, want to understand more of it
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redwine49
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May 06, 2021, 11:19:59 PM
 #2

heyy nicolo
i just find out about that Binance Leveraged Tokens. unfortunately we only can buy them with USDT not BUSD.
what have you read about it? can you give me some link

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niccolo_21 (OP)
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May 07, 2021, 07:06:34 AM
 #3

yeah sure,

hi redwine I am happy to share what I've found, so here some links on the subject:

a nice discussion on reddit
https://www.reddit.com/r/binance/comments/l3mbru/binance_leveraged_tokens_degrade_at_a_consistent/


a couple of articles from the binance blog itself
https://www.binance.com/en/blog/421499824684900885/4-Pitfalls-of-Trading-Leveraged-Tokens-and-How-to-Avoid-Them
https://www.binance.com/en/blog/421499824684901079/Why-you-shouldnt-hold-leveraged-tokens-longterm-


the guide on binance "academy" section
https://academy.binance.com/it/articles/a-beginners-guide-to-binance-leveraged-tokens-blvt


some YT videos containing also very clear "warnings"
https://www.youtube.com/watch?v=hLMELGznXXU&t=598s
https://www.youtube.com/watch?v=duXCDCXevIQ
https://www.youtube.com/watch?v=3DbSVwlouEY
https://www.youtube.com/results?search_query=binance+leveraged+tokens



I don't have time this very moment, but later on I plan to connect again and report my impressions about the trade I had
Tytanowy Janusz
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May 07, 2021, 01:36:03 PM
 #4

Everything you need to know is in those articles. I don't know what you want to know more that you already know. What "doubts and questions" you have?


Despite all the warnings about the product (given in some cases by binance itself) the trade executed with no surprises,

There are always no suprises when your trade was short term and amin asset price was not volatile too much.

The most imporant thing with Leveraged Tokens - do not hold them. Its guarantee of loss.
redwine49
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May 08, 2021, 02:36:24 PM
 #5

There are always no suprises when your trade was short term and amin asset price was not volatile too much.

The most imporant thing with Leveraged Tokens - do not hold them. Its guarantee of loss.
Is the loss guaranteed if we hold it for a long period of time??
I still don't understand why


Despite all the warnings about the product (given in some cases by binance itself) the trade executed with no surprises,
i just compared btcup and btcdown at binance.
June 2020 BTCup price is around 8$ and BTCdown price is around 12$
Now            BTCup price is around 155$ and BTCdown price is around 0.04$

It is clear that the risk & reward ratio between them is very high.
If we bet btcup, we only can win 20times, but if we bet btcdown we will lose 300times.


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Tytanowy Janusz
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May 09, 2021, 08:48:10 AM
 #6

Is the loss guaranteed if we hold it for a long period of time??
I still don't understand why

Thats why:

It is clear that the risk & reward ratio between them is very high.
If we bet btcup, we only can win 20times, but if we bet btcdown we will lose 300times.

When trend will reverse and BTC will start to dump couple % daily being BTCdown will not gives your 300x. It will give you 30x while Btcup will be under x300 risk.

It is explained in the link you already provided:
https://www.binance.com/en/blog/421499824684901079/Why-you-shouldnt-hold-leveraged-tokens-longterm-

"Leveraged tokens are built to multiply the underlying asset's daily return-the main component to remember here is DAILY. The leverage factor of a token will be reset every day. As a result, the performance of a token and its underlying asset can differ over the long term."

If BTC will dump 30% in one day you will lose 90% (100$ left from 1000$ investment). Next day BTC will do +50% (back where it was), you portfolio will do +150% from 100$ (250$). BTC recovered the dump but you are still 75% under water. In long run it sum up to be the worse long term product.
niccolo_21 (OP)
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May 09, 2021, 10:01:26 AM
 #7

Is the loss guaranteed if we hold it for a long period of time??
I still don't understand why

Thats why:

It is clear that the risk & reward ratio between them is very high.
If we bet btcup, we only can win 20times, but if we bet btcdown we will lose 300times.

When trend will reverse and BTC will start to dump couple % daily being BTCdown will not gives your 300x. It will give you 30x while Btcup will be under x300 risk.

It is explained in the link you already provided:
https://www.binance.com/en/blog/421499824684901079/Why-you-shouldnt-hold-leveraged-tokens-longterm-

"Leveraged tokens are built to multiply the underlying asset's daily return-the main component to remember here is DAILY. The leverage factor of a token will be reset every day. As a result, the performance of a token and its underlying asset can differ over the long term."

If BTC will dump 30% in one day you will lose 90% (100$ left from 1000$ investment). Next day BTC will do +50% (back where it was), you portfolio will do +150% from 100$ (250$). BTC recovered the dump but you are still 75% under water. In long run it sum up to be the worse long term product.

personally I understand this; having read the articles and all this is quite clear: I may need to study it a bit in depth, but the general picture I gues I got it.

Everything you need to know is in those articles. I don't know what you want to know more that you already know. What "doubts and questions" you have?


Despite all the warnings about the product (given in some cases by binance itself) the trade executed with no surprises,

There are always no suprises when your trade was short term and amin asset price was not volatile too much.

The most imporant thing with Leveraged Tokens - do not hold them. Its guarantee of loss.

My question was simply this: is it all baked into price, isn't it?

Because after all, I am sure you'll agree with me, that's the only point that matters from a risk management point of view as a trader: being able to clearly define risk.

When you trade leveraged futures for instance, your risk comes not only from the outcome of the price action, but also from the margin and liquidation settings. So in that case your risk is defined by your price action (stop loss ecc) and by your margin, which of course you need to take always into serious consideration.

When you trade BLVT Leveraged Tokens on the other hand, my guess is that you may even ignore what is happening under the price "engines": whether the leverage was rebalanced or not, whether you are paying a daily funding fee or whatever: you don't care.
And why is that?
Because, once again, it's all baked into price, isn't it?

So once again what defines risk is simply your price action: that you can clearly observe on the chart and that you can effectively define by a simple... stop-loss.

I don't know if I expressed clearly..

Let me give you another example: when you trade a perpetual swap contract on bitmex you pay or receive a periodic funding fee which occurs every 8 hours (shorts pay long or viceversa).

Now, this element is not reflected into the asset price, but it is shown in a dedicated item in your trading reports.
This means that funding fees are another element to take into account when defining risk other than price action, when trading swaps on bitmex.

That doesn't happen in BLVT, does it? Because once again it's all baked into price (or the NAV, as they call it, right?)

So this is my point / doubt: those mechanisms underlying BLVT price definition may even be complex and various but, as long as all this elements are expressed and reflected into one single element (which is price), you can always define your risk clearly and trade this asset as any other ordinary trading asset; and, most importantly: you can always define your risk by observing only one single element, which in this case is price action.
Not margin, not liquidation, not fees: you will observe and base upon price action and price action only.
Is this right?
Tytanowy Janusz
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May 09, 2021, 11:08:47 AM
Last edit: May 09, 2021, 11:33:28 AM by Tytanowy Janusz
 #8

So this is my point / doubt: those mechanisms underlying BLVT price definition may even be complex and various but, as long as all this elements are expressed and reflected into one single element (which is price), you can always define your risk clearly and trade this asset as any other ordinary trading asset; and, most importantly: you can always define your risk by observing only one single element, which in this case is price action.
Not margin, not liquidation, not fees: you will observe and base upon price action and price action only.
Is this right?

Yep. Everything is calculated into price. Token is backed by real asset. Binance is constantly rebalancing amount of tokens. You only need to know that you need to subscribe/redeem your funds (max20k per user). Every fees (except trading fees), funding too is transfered into asset price.

"iv. Management fees: A daily management fee of 0.01% will be charged at 00:00 UTC and reflected directly in the net asset value of the leveraged tokens;
v. Funding fees: Funding fees are paid (or paid to) the underlying fund based on the funding rate and reflected directly in the net asset value of the Leveraged tokens. Binance takes no fees for funding rate transfers; these are directly between traders."
https://www.binance.com/en/leveraged-tokens/tokens/allTokens

The only fee that is not reflected into price are Subscription and Redemption  fees.
"ii. Subscription fees: Subscription fees are charged when users choose to subscribe tokens, which is currently set at 0.1% per subscription.
iii. Redemption fees: Redemption fees are charged when users choose to redeem tokens, which is currently set at 0.1% per redemption."

It is technically possible for price to go 0.
redwine49
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May 11, 2021, 07:50:22 AM
 #9

So this is my point / doubt: those mechanisms underlying BLVT price definition may even be complex and various but, as long as all this elements are expressed and reflected into one single element (which is price), you can always define your risk clearly and trade this asset as any other ordinary trading asset; and, most importantly: you can always define your risk by observing only one single element, which in this case is price action.
Not margin, not liquidation, not fees: you will observe and base upon price action and price action only.
Is this right?

Yep. Everything is calculated into price. Token is backed by real asset. Binance is constantly rebalancing amount of tokens. You only need to know that you need to subscribe/redeem your funds (max20k per user). Every fees (except trading fees), funding too is transfered into asset price.

"iv. Management fees: A daily management fee of 0.01% will be charged at 00:00 UTC and reflected directly in the net asset value of the leveraged tokens;
v. Funding fees: Funding fees are paid (or paid to) the underlying fund based on the funding rate and reflected directly in the net asset value of the Leveraged tokens. Binance takes no fees for funding rate transfers; these are directly between traders."
https://www.binance.com/en/leveraged-tokens/tokens/allTokens

The only fee that is not reflected into price are Subscription and Redemption  fees.
"ii. Subscription fees: Subscription fees are charged when users choose to subscribe tokens, which is currently set at 0.1% per subscription.
iii. Redemption fees: Redemption fees are charged when users choose to redeem tokens, which is currently set at 0.1% per redemption."

It is technically possible for price to go 0.
Ok i can see a little bit now. When we trade BLVT whatever we bet UP or DOWN.
Our greatest enemy is violatility. It will become more unprofitable when the asset price do some sideways action.
It's make sense now, this is the price when we don't have to worry about liquidation and stop loss

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niccolo_21 (OP)
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May 11, 2021, 09:34:27 AM
 #10


Yep. Everything is calculated into price. Token is backed by real asset. Binance is constantly rebalancing amount of tokens. You only need to know that you need to subscribe/redeem your funds (max20k per user). Every fees (except trading fees), funding too is transfered into asset price.

"iv. Management fees: A daily management fee of 0.01% will be charged at 00:00 UTC and reflected directly in the net asset value of the leveraged tokens;
v. Funding fees: Funding fees are paid (or paid to) the underlying fund based on the funding rate and reflected directly in the net asset value of the Leveraged tokens. Binance takes no fees for funding rate transfers; these are directly between traders."
https://www.binance.com/en/leveraged-tokens/tokens/allTokens

The only fee that is not reflected into price are Subscription and Redemption  fees.
"ii. Subscription fees: Subscription fees are charged when users choose to subscribe tokens, which is currently set at 0.1% per subscription.
iii. Redemption fees: Redemption fees are charged when users choose to redeem tokens, which is currently set at 0.1% per redemption."

It is technically possible for price to go 0.

thanks for your reply.

I don't have all the time that I used to have previously in my week days now, so I usually end up carrying some things to the weekend where I have more time. So I guess I'll be processing in more details on your answer and in case elaborate something.
Thanks in the meanwhile

ps: yeah redw. one fun exercise if you have time would be to compare (by charts) how a particular token rose or declined compared to the corresponding underlying asset.

I am sure we'll find out that BTCUP rose less compared to how much btcusd rose; and BTCDOWN declined more than how much btcusd rose
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May 19, 2021, 11:22:21 AM
 #11

and what are the differences between subscribing and buying?
Tytanowy Janusz
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May 21, 2021, 06:13:02 AM
 #12

and what are the differences between subscribing and buying?

Buy/sell option allows you to buy/sell tokens that are in circulation from other traders. Subscription/redemption gives you and option to force binance to create/burn new tokens for you and back them up with real bitcoins on the market. This option is more expensive (additional fee) and is used mostly in extreme cases when there is a difference between BTCUP/BTCDOWN spot price and value they represent.


"Leveraged tokens are traded on the Binance spot market. In addition, they can also be redeemed for the value they represent. In this case, you’ll need to pay a redemption fee. In most cases, though, you’ll be better off exiting your position in the spot market rather than through the redemption process. Exiting through redemption will typically be more expensive than exiting on the spot market unless something like a black swan event occurs. This is why it’s almost always recommended to exit your BLVT position on the spot market.
You’ll see a term on the leveraged token’s page called Net Asset Value (NAV). This refers to the value of your leveraged tokens denominated in USDT. When you redeem your tokens, the USDT you’ll get will be determined by the NAV."
https://academy.binance.com/en/articles/a-beginners-guide-to-binance-leveraged-tokens-blvt
niccolo_21 (OP)
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May 24, 2021, 07:39:39 PM
 #13

and what are the differences between subscribing and buying?

Buy/sell option allows you to buy/sell tokens that are in circulation from other traders. Subscription/redemption gives you and option to force binance to create/burn new tokens for you and back them up with real bitcoins on the market. This option is more expensive (additional fee) and is used mostly in extreme cases when there is a difference between BTCUP/BTCDOWN spot price and value they represent.


"Leveraged tokens are traded on the Binance spot market. In addition, they can also be redeemed for the value they represent. In this case, you’ll need to pay a redemption fee. In most cases, though, you’ll be better off exiting your position in the spot market rather than through the redemption process. Exiting through redemption will typically be more expensive than exiting on the spot market unless something like a black swan event occurs. This is why it’s almost always recommended to exit your BLVT position on the spot market.
You’ll see a term on the leveraged token’s page called Net Asset Value (NAV). This refers to the value of your leveraged tokens denominated in USDT. When you redeem your tokens, the USDT you’ll get will be determined by the NAV."
https://academy.binance.com/en/articles/a-beginners-guide-to-binance-leveraged-tokens-blvt

thanks for your answer!
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