The difference between an ETP and Margin Trading
Our Exchange Traded Products (ETP) is managed by the Huobi platform as the product manager to manage ETP products. The product manager manages the underlying assets to achieve constant leverages.
Taking a user's purchase of BTC*3 as an example, the difference compared to a user's BTC/USDT 3 times long leverage transaction is:
1. Convenient operation, no need to guarantee assets
The method for users to purchase BTC*3 is the same as the spot transaction operation process. Users only need to buy and sell at the transaction price. The ETP product manager will manage the position of the underlying assets corresponding to BTC*3, and users can achieve leverage without paying collateralized assets. This is the purpose of the transaction.
2. Constant leverage and wear and tear of net worth
1) Constant leverage
After the user purchases BTC*3, the platform will configure and manage the underlying BTC assets corresponding to the BTC*3 held by the user, and the system will use the position adjustment mechanism (see introduction of the position adjustment mechanism below for details) daily to BTC*3. The corresponding positions are increased by floating profits and reduced by losses to ensure that the underlying BTC asset positions corresponding to the user's BTC*3 are always at 3 times leverage.
A user uses 3x leveraged products or 3x contract products to buy long BTC:
If the BTC price drops by 33% after going long, the user's position will be liquidated, and all assets will be lost.
If the BTC price rises by 33%, the user's assets will double, and the actual capital leverage will change from 3/1 to 4/2, which is 2x.
User BTC*3 goes long BTC:
If the BTC price drops by 11.11% after buying BTC*3 and the actual leverage becomes 4x, the system will initiate a rebalancing mechanism to lighten up the position, avoid liquidation of the position, and enable users to reduce losses in the unilateral downward market.
If the BTC price increases by 33.33%, the user’s assets double and the actual leverage becomes 2 times, the system will automatically use the profit part to increase the position on the second day, leaving the funds still at 3 times leverage.
2) Wear and tear of net worth
Should a user purchase an ETP and subsequently the price drops by 11.11% and then rebounds by 12.5%, the price of BTC remains relatively unchanged. However, the BTC*3 contract triggers a position adjustment during the daily trading hours. This means its Net Value drops by 8.33% and users may suffer greater wear and tear under the volatile market.
Risk Reminder : There is a possibility that the NAV of ETP can become zero or the product will be removed due to inherent market risks, high fees, slippage, rebalance algorithm frontrunning and any other perceived unknown risks associated with ETP
Identity Authentication Requirements:
Due to local laws and regulations, the following countries and regions are temporarily unable to trade ETP products, including Belarus, Myanmar, Congo, Cuba, Canada, Chinese Mainland, Hong Kong (China), Iran, Iraq, Côte d’Ivoire, Japan, Liberia, North Korea, Sudan, Spain, Syria, the United States, Zimbabwe.