KuCoin Leveraged Tokens are tokens with the feature of leverage, which is under the management of the fund manager, aiming to bring traders with a specific multiple of profits of the underlying assets by trading Leveraged token shares. For example, if the underlying asset is BTC, when its price increases by 1%, the net value of BTC3L will increase by 3% whereas that of the BTC3S will drop by 3%.
Explanation of relevant terms
1 Net Value & Deal Price
Net Value: Theoretically, the net value of the leveraged fund is the fair price of leveraged token shares in the secondary market.
Deal Price: The latest deal price of leveraged tokens in the secondary market.
However, due to market fluctuations, the transaction price in the secondary market may deviate from the fair price (that is, the net value of the fund) at certain times, resulting in a price premium.
2 Rebalancing mechanism （Position adjustment mechanism）
To ensure that the ratio of the combined leverage portfolio will not deviate much from the agreed one, the system will rebalance positions at 23:30:00 - 23:45:00 (UTC) every day (apart from exceptional circumstances).
When facing sharp fluctuations, if, compared with the last rebalancing, the change of the underlying asset exceeds the given threshold, KuCoin will rebalance the positions to control the risks.
For example, if the BTC price increases by 15%, KuCoin will only rebalance the positions with -3x leveraged tokens.
3 Subscribe & Redeem
Subscription refers to the behavior of investors buying fund shares from a specific institution; redemption refers to the investor's application to a specific institution (such as a fund company) to redeem their fund shares into cash and return to their account. Subscription and redemption are processed every 8 hours，they are behaviors that occur in the primary market.
The subscription ("Subscribe") and redemption ("Redeem") of leveraged tokens refers to users directly trading with the KuCoin Leveraged Token management team.
Trade refers to the leveraged tokens that users trade with each other in the Spot trading market.
Please note that the prices of subscription/redemption are determined by the results of execution, thus there are many uncertainties for the "Subscribe" and "Redeem" functions as the transactions are only carried out three times a day - 07:45, 15:45, 23:45 (UTC). Therefore, it is recommended that users use the "Trade" function to trade leveraged tokens in the Spot market. Please be prudent of your trading decisions.
The basket refers to the asset base of the leveraged token
6 Asset management scale
The total market value of the assets corresponding to the leveraged tokens
7 Issued Number
Issued Number of shares of leveraged tokens issued.
8 Daily management fee
Management fees are charged by 23:45 (UTC) every day, the fee will be incorporated into the net asset value of the Leveraged Tokens. As the market fluctuates, the management fee of leveraged tokens will be adjusted dynamically.
The management fee is reflected in the net value, and the user's holdings will not decrease. If you hold leveraged tokens for a long time, the system will keep charging your management fee. Therefore, It is recommended that not to hold the leveraged tokens in a long time.