About the Price Mechanism of AscendEX’s Leveraged Tokens

A leveraged token is essentially a fund. Even though leveraged token trading is like spot trading, users effectively trade fund shares on AscendEX, rather than crypto assets themselves. Likewise, users buy a leveraged token at the net value of the underlying asset, rather than at its spot price.

Take the leveraged token BTC3L as an example—you buy 300 BTC3L at the unit price of 1 USDT, which means you hold 300 USDT worth of BTC3L. Thus, you hold a BTC3L share worth 300 USDT, rather than BTC assets worth 300 USDT and 1 USDT is also not the BTC asset price, but rather the net asset value of BTC3L.

 

Net Asset Value Calculation

Net asset value (NAV) is the actual value of a leveraged token, reflecting the fair market value of a share unit of the leveraged token. This is also the price at which users buy the leveraged token. 

Formulas for calculating the net asset value of AscendEX leveraged tokens:

3x leveraged tokens: Net asset value = the net asset value at the previous rebalancing point*[ 1±3*(the latest price of the underlying asset-the price of the underlying asset at the previous rebalancing point)/ the price of the underlying asset at the previous rebalancing point *100%]

5x leveraged tokens: Net asset value = the net asset value at the previous rebalancing point*[ 1±5*(the latest price of the underlying asset-the price of the underlying asset at the previous rebalancing point)/ the price of the underlying asset at the previous rebalancing point *100%]

Please note: the net asset value at the previous rebalance point refers to the net asset value of the position after the last rebalancing event.

 

Net Value Split and Merge

To lower the trading access, increase the net value sensitivity of leveraged tokens and optimize trading experience, AscendEX will irregularly perform a share split or merge for the net value of leveraged tokens. Users will be informed through official announcements. The specific process is as follows: issue trading suspension notice at 2:00 p.m. UTC; suspend trading at 2:30 p.m. UTC; resume trading at 3:00 p.m. UTC. With a share merge or split, the number of the leveraged token shares held by users and the unit value per share will change, but the total value of users’ holdings will not change. 

For instance, you buy 100 shares of BTC3L with a net value of 1 USDT. A BTC price rise pulls the net value of a BTC3L share up to 10 USDT, meaning the total value of your BTC3L holdings is 10*100=1000 USDT. Due to the overhigh net value, the platform performs a share split on BTC3L, sending its net value down to 2 USDT, thus increasing the number of your BTC3L shares to 500. Despite a lower net value for BTC3L, your total holding value is still at 2*500=1000 USDT.

Details rules on the net value share split and merge of AscendEX’s leveraged tokens:

When the net value of a leveraged token after rebalancing is lower than a set level, the platform will perform a share merge for the leveraged token, namely that the number of the leveraged token shares held by users will become 1/N that before the merge, and the unit value will be N times that before the merge.

When the net value of a leveraged token after rebalancing is higher than a set level, the platform will perform a share split for the leveraged token, namely that the number of the leveraged token shares held by users will become N times that before the split, and the unit value will be 1/N that before the split. 

AscendEX will regularly announce the net value merge/split history. Users can visit the Split and Merge page to check for more details.

Please note: Market volatility may lead to a potential premium in net value in a certain time period. Users should be aware that the price at which they buy a leveraged token does not dramatically deviate from the net asset value of the underlying asset so as to avoid losses.

 

Risk Disclosure: As an emerging financial derivative, theoretically, there is no liquidation risks for a leveraged token. However, with incorrect trend predictions, there will be a risk that the net asset value of a leveraged token approaches 0 amid extreme market conditions. Please fully understand the rules before engaging in leveraged token trading and be cautious to reduce potential risks.

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