Review on BTCUP by Stephen Toluwani
Leveraged token trading on Bitcoin
The BTCUP token is a leveraged ETF token that Binance seems to have first pioneered into bringing. The token is used to expose traders (spot traders) to the world of leverage trading without exposing them to the risks associated with loosing their capital due to liquidation calls. BTCUP token works this way: it starts at a given price for the day of which a trader is expected to buy if he/she is of the belief that Bitcoin will be bullish or increase In value. The BTCUP token increases price of bitcoin rising or diminishing price by x3 meaning that, if Bitcoin goes $200 positive, the trader gets a value of $600 instead and when it retraced by $100, the trader looses a value of $300. One major reason why leveraged token trading are good for newbies who intend to go trading futures contracts with leverages, is that BTCUP in this example, can never get aa liquidation call. The only issue one might face when holding the token for long whay we call rebalancing mechanism whereby price is restarted to a value again to begin the next day of trading. This makes tokens like BTCUP, not a crypto for long term HODL.
Pros
- BTCUP offers a x3 leverage to traders with no risk of liquidation calls
- Many exchanges are beginning to support the trading of leveraged tokens like BTCUP
Cons
- They are suitable only for very short term investments due to rebalancing mechanism
