The ETF products will “help users magnify their returns.”

The Mxc Exchange was established in April 2018 in Singapore by a group of digital asset enthusiasts. The exchange offers token Trading, OTC Trading, perpetual swap trading, and financial products.

It announced December 28 the launch of its range of leveraged ETFs based on cryptocurrencies BTC, ETH and EOS. These ETFs are available for both long and short plays.

The rationale for leveraged ETFs

According to Mxc Exchange, mainstream digital assets suffer from lower volatility compared to many other altcoins. As a result, investors tend to have rather small exposures to mainstream assets. Speculative trading volumes instead flow to altcoins because “bad coins drive out good ones.”

The leveraged ETFs introduced by the Mxc Exchange will draw speculative bets to an underlying of mainstream cryptos such as BTC, ETH, and EOS.

However, investors with low risk tolerance should avoid these leveraged ETFs, the Exchange warns. “If investors are confident in their judgment of market trends, such as the upgrade of Ethereum, the halving of bitcoin production, and the impact of Voice on EOS launch, leveraged ETF is a relatively practical tool,” Mxc suggests.

In other words, trade these ETFs if you are sure of the trend and can stomach the leverage-induced volatility.

How it works

Mxc provides the following leveraged ETFs:

• BTC3L/USDT
• BTC3S/USDT
• ETH3L/USDT
• ETH3S/USDT
• EOS3L/USDT
• EOS3S/USDT

BTC3L refers to 3-times buy (long) of BTC. The “L” here stands for “Long.” Similarly, BTC3S refers to 3-times sell (short) of BTC. The “S” here stands for “Short.”

For example, assume that a user bought the BTC3L product, and the price of BTC (the underlying asset of BTC3L) rises by 10%. The leverage ETF product – BTC3L – will correspondingly rise (3x) by 30%. On the contrary, if BTC falls by 10%, the BTC3L will also decrease by 30%.

However, the BTC3S reverse ETF, also called a “short” or “bearish” ETF, provides the opposite performance of an index. Reverse ETF can use 3-times leverage to amplify the performance caused by a drop in the underlying index. For example, if the price of BTC falls by 5%, then BTC3S will rise by 15%. If the price of BTC increases by 5%, BTC3S will fall by 15%.

The exchange will daily balance its index exposure to maintain a steady leverage ratio.

Related Story: Digital Assets: Its Halving in 2020 Could Boost Bitcoin to $50,000