No Liquidation Risk, Controlled Risk Exposure
Since ETF does not require margin deposits, they are theoretically free from liquidation risks. Additionally, the rebalancing mechanism helps control risk effectively. For example, in the case of BTC3L, the ETF token would only go to zero if the underlying BTC perpetual contract moved by 33%. However, in practice, the rebalancing mechanism activates automatically when BTC contract price fluctuations exceed a certain threshold, adjusting positions in advance to mitigate risk and restore the leverage ratio to 3x.
No Margin Requirement, Higher Capital Efficiency
Compared to traditional leveraged trading or perpetual contracts, ETF offers higher capital efficiency. Since trading ETF tokens is similar to spot trading, users do not need to deposit margins or allocate funds for collateral. This means that the entire invested amount is fully utilized, enhancing capital efficiency.
Simple Trading Process with Built-in Leverage for Amplified Returns
The trading mechanism of ETF is as straightforward as spot trading. Users only need to choose between a long (e.g., BTC3L) or short (e.g., BTC3S) ETF token and place buy or sell orders accordingly—no complex procedures are required. Despite simplicity, ETF comes with built-in leverage, providing amplified returns without the need for margin deposits or borrowing funds. This makes them more convenient and advantageous compared to traditional crypto margin or futures trading.
Compounding Effect
Gate’s ETF benefit from a compounding effect in one-sided markets (either continuous uptrends or downtrends). This is because, under the rebalancing mechanism, profits from the existing position are automatically reinvested into the total position during daily rebalancing. As a result, in sustained trends, users can gain higher returns through the compounding effect, making ETF particularly well-suited for trending markets.
