Bitshares Leverage Asset
Leverage tokens or assets are cryptocurrencies that allows a user to gain exposure to the futures market without the need to open positions with collateral. These tokens amplify the gains or losses you would get from trading a normal cryptocurrency. For example Bitcoin Bull is a 3x Leverage token of Bitcoin. This means that if Bitcoin was to go up by 10% the token would rise by 30% and vise versa. Although these tokens can be bought on the spot they still carry risks, as if there should be sudden volatility in the negative direction the tokens value would drop at a fast rate. Because of this risk leverage assets are considered as short term assets to hold for quick profits only.
Introducing Bitshares Leverage Asset the base collateral for borrowing leverage asset tokens on the bitshares DEX. What sets LVRG apart from leverage tokens is that it is not really a leverage token on its own but the tool to gain access to them. Thus in this case it doesn’t have the risks associated with leverage tokens except for those who intend to open margins with and borrow leverage tokens.
The Design of LVRG is such that its value would continue to rise for a forseable future.
Firstly it has a psuedo staking reward for token holders with a minimum of 2million LVRG
Secondly all the generated profits from sales of the token is used to reward users who stake to its stablecoin liquidity pools in the form of monthly BTS airdrops.
Thirdly 25% of market fee income is used to raise the interest rates of its leveraged backed assets.
Finally its Max Supply is capped at 999million and much of that supply has already been distributed. about 70million tokens will be locked as collateral in leverage backed assets and 80million in its liquidity pool tokens will be burnt in a permanent burn address in the future.
BTX Leveraged Backed Asset
The Bitshares ecosystem currently does not have the tools for leverage trading on the DEX, however it has the margin features which can be explioted to create such tokens. The first Leverage asset token created by CRUDE is BTX which follows the price change of Bitshares by 1.5x, its value is also dependent on the inherent value of its collateral, “Leverage”, and generated income.
One of its strong features is that it has a constant valuation of 1.5BTS and has a quarterly settlement plan to allow Borrowers sell for profit.
However like initially said other factors may change this constant on the market. These factors include the spot price of bitshares, the spot price of Leverage, number of days to expiration of contract, market volatility and market fees from trading the assets(Both LVRG and BTX). Currently all operations from a contract wallet called crude.btx-account which aims to buy up as much of the BTX token it can buy at notional value quarterly. Each bid the wallet makes ends after every Quarter after which a new bid is set at the notional value of that day. Thus the wallet aims to reduce the supply of BTX on the market in the hope of increasing the notional value above 1.5BTS, the perceived price with which it was borrowed.
As a trader you can benefit from this by either borrowing the asset into existence and selling it on the market for bitshares (Opening a Short Position) or bidding for BTX tokens on the market in the hope of gaining more bitshares in the future (Opening a Long Position) when its notional value has increased.
BTX/BTS MARKET This is the market of interest where the futures trading really happens, traders may constantly buy and sell the asset daily, but the major trades will happen on the 20th of each quarter where the BTX supply is bought at notional value. The other market traders can buy from is the LVRG market.
One of the advantage of BTX is that unlike traditional leveraged assets that use rebalance features to sell off position, BTX uses Margin Call Ratio (MCR) which is set at 1.5x the initial collateral, also the feed price is not daily but quarterly to allow borrowers exit their position by selling for 1.5BTS if the value of the underlying collateral drops heavily in that quarter.