Poloniex exchange partners with FTX to bring in the leveraged tokens. Poloniex is one of the largest cryptocurrency exchanges based in the US.
Poloniex had been acquired by an investment group that included the founder of Tron, Justin Sun. Justin had been persuaded to revoke the trading activity following an error in the system a while ago.
“We have identified the bug and deployed a fix,” said the firm.
While remaining in the Circle, the base of exchange moved from Delaware to Bermuda, after the acquisition, removed the customers of the U.S. Later, it began letting users withdraw up to $10,000 per day in the absence of know-your-customer (KYC) completion formalities.
What are leveraged tokens?
The leveraged tokens are similar to some ERC-20 tokens in terms of trading, holding, and transferring other tokens. The primary characteristic of the leveraged tokens is that they offer leveraged crypto exposure without letting you bother about margin, collateral, prices of liquidation, and anything else which could be required to handle along with the traditional margin trading.
These tokens offer a simple means to get hands-on leveraged crypto assets exposure. The tokens are handed out as well as redeemed through FTX while also being traded over Poloniex.
How to redeem and issue these tokens?
In case you wish to issue $1,000 worth of BULL, you have to spend $1,000 while the account for BULL on FTX will be buying perpetual features of BTC worth $3,000, creating 3x long BTC worth of BULL.
You can even redeem the value represented by these tokens at any certain time. In order to do so, you would need to send your $1,000 worth of BULL to FTX to redeem it. It will demolish the token, causing the account for BULL to sell futures worth $3,000 back while depositing in your account a sum of $1,000.
The issuance and redemption process is only recommended for advanced customers who can completely understand the documentation for the leveraged tokens.
Leveraged tokens, however, are at much greater risk as compared to the spot markets and even are potentially much volatile. They are subject to instant fluctuations by huge amounts per day. The tokens perform a little different as compared to the conventional leveraged exposure.