How to Margin Trade Crypto With Limited Downside & Unlimited Upside
DX.Exchange unleashed a new kind of disruption on the financial markets. They are the exchange’s native virtual assets through which investors can have access to fractional investing in traditional Wall Street assets. You might remember DX for its blockchain-powered tokenization of assets such as Tesla (TSLA) and Apple (AAPL) stocks as well as ETFs such as QQQ and SPY.
Before now, the barriers to entry in Wall Street has kept the financial markets open mostly to the upper and middle classes folks. For instance, the current $1,988 trading price of Amazon (AMZN) makes it pricey for most people. Fractional investing however makes it easy to purchase a little part of a share when you can’t afford to buy a full share. DX facilitates the indirect purchase of Wall Street assets for its users through a blockchain-powered platform built on Nasdaq’s matching engine and market surveillance technology.
DX is bringing its disruptive research to the cryptocurrency market with the launch of first of a kind Smart Leverage Tokens (SLT), called Turbo Tokens. The new digital revolution powered by DX combines the best of blockchain technology and Wall Street to provide cryptocurrency traders with a new way to access margin trading.
What are Smart Leverage Tokens (SLTs)?
Smart Leverage Tokens (SLTs) are a new breed of crypto assets that might eventually become the de-facto solution for leveraged trading in cryptocurrencies. DX’s SLT is a decentralized index that facilitates margin trading for users without the debt, high fees, and complicated margin processes of other exchanges. With SLTs, traders can get a multiplier effect that could potentially deliver gains that exceed the performance of the underlying asset.
Turbo Tokens are intrinsically leveraged assets designed to track the second by second change in the price of a crypto asset against the USDT or DX Cash. You can use Turbo Token to go long (a trade expecting the price to go up) or short (a trade expecting the price to go down). The inherent leverage of Turbo Tokens now unlocks a multiplier effect that provides bigger returns.
The best part is that Turbo Tokens don’t require you to borrow funds from an exchange; hence, you get to own your risk without the fear of margin calls or a negative balance. Whereas existing leverage trades “lend” you money to place a trade, thereby obligating you to repay the debt even if a trade goes against you, Turbo Tokens limit your liability to the only money you invested in the trade. The unique compounding nature of Turbo Tokens also makes it practically impossible for the value of your portfolio to go to zero unless the value of the underlying asset goes to zero.
A New Exciting Kind of Leveraged Trading
Turbo Tokens provide an opportunity to take advantage of margin trading in the cryptocurrency markets. For instance, if your assessment of the market suggests that the price of BTC will rise and you take a position in a 10X Turbo Token BTC/USDT trade, a 1% increase in the price of BTC will trigger a corresponding 10% increase in the price of your 10X Turbo Token long trade. Whereas a regular trade’s portfolio would have only increased by 1%, your portfolio would have increased by 10%. The reverse also holds true for short trades if your analysis of the markets suggests that the price of an underlying crypto asset will fall.
However, traders might erroneously assume that the leveraged returns are generated on a continuous basis, so that if an underlying price is up 5% for a day, the 10x Turbo Token should be up by 50% over the same time frame – this, however, is an incorrect assumption.
Leveraged trading with Turbo tokens is determined on a second by second basis of the underlying crypto asset. The intrinsic volatility and return of a trade is not subject to the perspective of long timeframes such as days, weeks, or months. Leveraged trading with Turbo Token simulates an index.
(DELTA) of the price in the underlying asset over small time increments (SECONDS), and the value of the trade is perpetually changing based on a tick by tick data.
For instance, let’s assume that you bought a Turbo Token Long 5X for $100 while the price of BTC/USDT is $10,000. If the price of BTC/USDT goes up 1% to $10,100 ($10,000 + 1%) in 1 second, your Turbo Token Long 5X will increase by 5% because you are long 5X; hence your Turbo Token Long 5X will now be worth $105 ($100 + 5%).
After 1 second, if the price of BTC/USDT goes up 1% again, the price of BTC/USDT will now be $10,201 ($10,100 + 1%) while the new price of the Turbo Token Long 5X will be $110.25 ($105 + 5%).
For short trades, let’s assume that you bought a Turbo Token Short 5X for $100 while the price of BTC/USDT is $10,000. If the price of BTC/USDT goes down 1% to $9,900 ($10,000 – 1%) in 1 second, your Turbo Token Short 5X will increase by 5%; hence your Turbo Token Short 5X will now be worth $105 ($100 + 5%).
After 1 second, if the price of BTC/USDT goes down another 1%, the price of BTC/USDT will now be $9,801 ($9,900 – 1%) while the new price of the Turbo Token Short 5X will be $110.25 ($105 + 5%).
Final Words
DX has proactively taken strategic steps to ensure transparency and avoid manipulation by aggregating the feed of major exchanges such as Binance, Bitmex, OKex, Bitfinex, and Houbi. DX’s Turbo Tokens are potential game-changers and it would be interesting to see the level of acceptability that they enjoy when they debut in the cryptocurrency market. Leveraged trades might be the best way to get the most value out of the market now that bears and bulls are locked in a battle for the control. With Turbo Tokens long term investors can hedge their positions and traders can find opportunities to make profit irrespective of whether the market is trading up or down in the short term.
Do you think Smart Leverage Tokens are the future of margin crypto trading? Let us know in the comments below!
The Rundown
Published at Wed, 10 Jul 2019 14:15:03 +0000
