Comparison of FTX and coin-ann lever tokens: different products in different scenarios

In terms of product innovation and understanding of the traditional financial market, it is not unreasonable to put FTX first in the field of cryptocurrency trading platform.

The newly launched force contracts, quantitative space, panic index tokens, previously launched gold stability currency contracts, crude oil contracts, etc., you can not see these products in other platforms, of course, the most familiar FTX leveraged tokens launched by them last year.

The most important meaning of leveraged token is that the financial product token, or synthetic asset, is a new financial product of cryptocurrency industry. In fact, the cryptocurrency platform online transactions must be block chain projects? The ceiling is too low, and the trend must be towards financial and asset tokens.

However, the product of leveraged tokens has recently been the subject of some controversy. The platform announced a highly publicized in-depth cooperation with FTX, which was followed by the launch of FTX leveraged tokens, which were subsequently removed due to user education issues, and then announced the launch of its own leveraged tokens.

Zhao changpeng, founder of coinan, explained that FTX leveraged tokens were not investor friendly, while SBF, founder of FTX, tweeted thumb up on The Block analyst Larry Cermak's comments about coinan leveraged tokens. "Shouldn't we talk about the fact that FTX leveraged tokens were quietly launched a month and a half after they were removed? Shouldn't we talk about the fact that CZ said they were removed to protect users?"

In this regard, the dispute has caused a lot of controversy at home and abroad, focusing on the differences and advantages and disadvantages of the products. In our opinion, the focus should not be on the public opinion on social media, but on the differences between the two companies' leveraged tokens. There is no readily understandable comparison between the two on the Chinese Internet, but this article will compare them from two main points of difference: the stock swap mechanism and the token property.

What are leveraged tokens?

For example, when bitcoin is 3 times long leveraged tokens, it means that bitcoin is up 10 percent, leveraged tokens are up 30 percent, and vice versa. In fact, this is the traditional capital market evolved into the cryptocurrency industry's financial play. In 2010, TQQQ and SQQQ launched on Nasdaq are three times as long/short Nasdaq index classic products.

The logic of leveraged tokens is not complicated, but why did it happen that the currency was removed from the shelf of FTX leveraged tokens and then launched its own products? Let's see what the difference is.

Mechanism of the warehouse

This is where the two are most controversial.

First, FTX follows the traditional capital market. In order to ensure constant leverage, FTX needs to automatically add and subtract positions. As a result, FTX's leveraged tokens are not suitable for all trading scenarios, as there may be significant wear and tear.

With COINS, for example, assume that the position is a currency, the currency within 3 days of the price of $10000 on the first day, $11000 and $10000 on the third day of the second day, holding cash or general contract, regardless of the rates, fees and funds amount did not change the end of three days or $10000, not much.

According to the above examples, if BULL of FTX is used, that is, 3 times as long leverage token. According to the position adjustment mechanism of FTX's daily leverage token, the fund amount should be 10,000 x (1+ 10% x 3) x (1-9.09% x 3)= $9,454. It is important to note that the leveraged notes of FTX will be called at 0:02 UTC (8:02 am Beijing time)

However, if such fluctuations occur within a day, FTX will not normally shift positions and there will be no wear and tear. Unless there are severe fluctuations, for example, when holding BULL, the bitcoin falls by more than 11.15% on the day, resulting in more than four times of leverage, FTX will set the automatic position reduction on the day to reduce the wear and tear to protect users.

The figures can illustrate the problem: when a similar shock occurs, other leveraged tokens in the FTX platform, except for HALF of the shock token, will be more worn out. The spot price actually does not change, but the leveraged token asset has worn out by more than 5% at this time. Of course, 0.5 times the leverage of HALF shock token is an exception, shock token and the common BULL and BEAR applicable scenarios are completely different, HALF of the operation logic is similar to the grid transaction, the focus is on high sell low attract, price rise to reduce the position, fall to add the position, in the shock market is more appropriate.

In fact, different products are used in different scenarios, which is vividly reflected in FTX. Is it a problem for the FTX platform that the leveraged tokens of 3 times and hedging are worn? No, there is such a rule in the traditional capital market bull or bear certificate, and there are two scenarios in which such a product can play its role incisively and vividly.

One is the trend, for example, when a mainstream cryptographic asset starts the main wave (or the main wave), if you use spot or futures plus leverage investment, then you must subjectively grasp the entry point of floating surplus plus position, otherwise you will not enjoy the additional compound interest of continuous leverage.

However, leveraged scrip is a natural financial tool suitable for the trend, and the automatic position adjustment mechanism enables users to continuously increase their positions and roll profits without subjectively looking for entry points.

The other is to hedge the whole portfolio and reduce the risk exposure of other positions.

Take a simple example, if wang has a total value of 1 million yuan, the direction is long spot and futures positions, then he predicted that the market will fall into a correction, both do not want to give up the cost advantage of the position, but also afraid to bear the risk of short-term collapse, but also want to use as little capital, as far as possible to simplify the operation of the strategy to hedge.

In this scenario, leveraged tokens are very advantageous. Xiao wang may only need to take out 100,000 yuan from the long fund to buy the short leveraged tokens of cryptographic assets to realize real-time dynamic and efficient hedging.

If the market continues to rise, the hedge position loss is limited, the risk rate of the whole account is reduced; Hedging positions can also yield non-linear returns if the market is as expected short and fast, while keeping low-cost long positions intact.

After talking about the position adjustment mechanism of FTX's leveraged tokens, let's look at the leveraged tokens of currency safety. In terms of the position adjustment mechanism, there is a big difference between them.

Currency security lever token did not follow the tradition, but their own research and development of a set of algorithms, the logic of this algorithm is: can adjust the leverage at any time, when the market fluctuations will be violent, in a small range of shocks, the user's position is not changed.

Look from product introduction, currency Ann leverage tokens, belongs to the floating leverage, leverage floating between 1.5 times and three times, the product will leverage as the currency price changes and adjustment, when there is less than 1.5 times the lever adjustment, or more than 3 times, will start positioning of logic, with positioning, the lever back to the normal range.

But it's worth noting here that the position adjustment of a leveraged token is unpredictable.

The word "unpredictable", in other words, means that users cannot calculate how their leveraged tokens will benefit, how much they will benefit, and how much they will lose. It is also because these digital users cannot calculate by themselves, so they can only get the information provided by the currency and Ann.

To put it simply, when the lever token of currency safety fluctuates in a small way, it will not be worn out because there is no automatic adding or reducing the position, but the user will lose the surplus change brought by the lever floating.

As a result,Compared with the leveraged tokens of FTX, although the leveraged tokens can be held in the volatile market, they have lost the biggest advantage of the traditional leveraged ETF products in the trend market: the advantage of floating and adding positions. According to the logic of currency placement leverage token, when the unilateral rising market appears, the leverage will slowly reduce, and then add position adjustment, repeat this process. To be more extreme, in the unilateral rising market, investors choose to do long direction of leverage token, and the leverage will slowly reduce from 3 times to 1.5 times, and then from 3 times to readjust. It is difficult for users to fully enjoy the compound interest income brought by floating win plus position on the currency.

Tokens properties

This is another significant difference between the two, and it's easy to describe:An FTX leveraged token is an ERC20 token, but the currency is not.

Since it is a currency, FTX's leveraged token also has all the properties of an ERC20 token. First, it is your personal asset. Second, it can be charged at will, brought into any ethereum wallet, transferred between users at will, other trading platforms can be launched, and even DEX like Uniswap can be launched without any problems.

And currency Ann's leverage tokens are not real money, don't have any tokens, properties, that is to say, the user can only choose to trade within the currency anping station, is it actually does not essentially a financial tokens of products, users can't 100% sure currency etfs Ann leveraged products rigid to honour, the user can do is believe that currency, coupled with the above mentioned unpredictable characteristics of mechanism, the storehouse compared to FTX, currency Ann leverage tokens, become less transparent.

From the product to see two platform user portrait

Before looking at the user portrait, we have a premise that the products of both platforms are beneficial to our users. On this premise, we draw the user's differences from the leveraged token products.

FTX user, obviously is not ordinary small white retail investors, is not only a lever tokens products, FTX contracts are unified margin, FTX options trading interface partial Europe type style, even the most transactions use also is USD, these can be reflected, FTX users more are some professional investors, or the education investment of investors, the investors may have been in traditional capital market of seasoning, can know the game FTX products, can also read the trading rules.

Using the product of leveraged tokens as an example, FTX users will not have any doubts. They can judge the usage scenarios of ETF products by themselves and understand the wear and tear rules of ETF. All new products launched by FTX are for different scenarios or different portfolio strategies, which is very practical for professional investors.

However, different from FTX, as the largest cryptocurrency exchange platform in the world, the users of coinan are mostly small white people or investors with little investment experience. In the face of products such as etfs, investors with no investment experience will be unfamiliar with the rules, hold them for a long time, and eventually wear them to zero. At the extreme end of the scale, transaction fees can only be earned once, but the user's assets slowly decrease over time, which is not a good thing for the company.

So currency strategy is to simplify all the rules now, after investors see the right direction can make money, even if the wrong direction can also be less losing money, even at the expense of the transparency, tradition and so on characteristics can also accept, so we will see the money on leverage tokens, there is no automatic scaling out, even no Greek value options.

But personally, this strategy in the long run is not feasible, although the current encryption than traditional market scale is a lot of money market, but the user cannot be completely dependent on a platform, and a benign development platform can be sustained, users must have one of the most important link in education, a slump in 312 let all investors see the importance of the portfolio, total wealth in one direction, at that time may be feasible, but it can't never out of the question.

Like when cryptocurrency futures contracts first came out, how many people played? However, under the irreversible trend of leverage in the market now, portfolio and investment strategy must be the general trend. Even from a certain perspective, FTX has been undertaking the work of market and user education. The effect may not be obvious now, but such a trend is believed that people will gradually accept it.

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