XTZUP is a Binance Leveraged Token (BLVT) with the underlying cryptocurrency Tezos (XTZ). In simple words, BLVT is a sport-market tradeable asset that enables users to maximize exposure to the cryptocurrency market without worrying about liquidation. Thus, leverage tokens are financial derivatives that tend to move synchronously.
Additionally, leveraged tokens are not the same as cryptocurrencies because funding in leveraged token has no period and are constantly updated with the new price quotes. Moreover, the net value of the leveraged tokens moves in sync with the underlying assets. As a result, the prices of the leveraged token move in sync with the price of assets. Thus, in the case of XTZUP, the token aims to generate leverage gains when the Tezos prices go up.
Running on the Binance network, XTZUP and XTZDOWN are the first Binance Leveraged Tokens. When Tezos prices rise, XTZUP enables users to profit on leveraged gains. On the other hand, XTZDOWN enables users to profit from leveraged gain when Tezos prices fall. Hence, it can be concluded that the leverage gains from the BLVT can not be consistent.
The BLVT aims to maintain flexibility by generating 1.25x – 4x range leveraged gains when the Tezos prices rise. The flexibility feature intends to maximize profits while minimizing losses to avoid liquidation on upswings. However, significant market moves may cause real leverage to fluctuate outside the planned range. Besides, BLVT tries to safeguard users from the complexities of handling a conventional leveraged position by not compelling users to hold margin or pledge collateral.
Going further, rebalancing is another crucial component of leveraged tokens. Leveraged tokens use rebalancing to raise or decrease their futures bets in the underlying asset to achieve the desired leverage. As the price of its Tezos rises, it adds to its holdings. But, on the other hand, positions seek to be also cut if prices decline. BLVTs (Binance Leveraged Tokens) only rebalance when they are required. BLVTs are meant to optimize their correlation with the underlying asset and be unexpected in rebalancing to reduce the susceptibility of front-running tactics.
