Gate ETF FAQ: Operating Principles, Core Advantages, and Risk Management

In a clear trending one-sided market, Gate Leveraged ETF tokens will automatically increase positions when profitable, achieving a compounding effect, and will automatically reduce positions when losing, avoiding liquidation risks.

The daily 0.1% management fee covers the costs of perpetual contract hedging and rebalancing behind the scenes, allowing investors to enjoy leveraged effects through spot trading without directly handling complex contracts.

01 Product Essence and Operational Framework

Gate Leveraged ETF is a derivative designed to amplify the daily price movements of crypto assets. Essentially, it is a fund token, managed by a professional team on the platform, maintaining target leverage by holding and managing perpetual contract positions.

Unlike traditional stock ETFs that track a basket of stocks, crypto leveraged ETFs track the multiple movements of a single underlying asset (such as BTC, ETH).

Investors can buy and sell these tokens just like spot trading, but the price fluctuations are magnified by 3x or 5x.

The core mechanism to achieve this effect is “daily rebalancing.” To ensure the leverage ratio does not deviate from its target (e.g., 3x) due to asset price fluctuations, the system will automatically adjust positions at a fixed time each day (UTC+8 0:00) or during significant market volatility.

This means the system will automatically increase positions with profits and reduce positions with losses to stop out, and this process is executed entirely by algorithms with no action required by users.

02 Core Advantages and Applicable Scenarios

Compared to traditional margin contracts, Gate Leveraged ETF offers a distinctly different user experience and risk profile, with advantages particularly prominent in certain scenarios.

The most notable benefits are “no liquidation risk” and “spot-like operation.” Since users do not directly hold contract positions, they will never receive margin calls or face forced liquidation.

All operations are completed in the spot market; simply buy or sell the ETF token, greatly lowering the technical barrier and emotional stress of using leverage.

In clear trending markets, this product’s advantages are maximized. Thanks to the compounding effect of daily rebalancing, returns during sustained asset price increases may exceed those of simply holding a 3x perpetual contract.

For example, in two consecutive days of upward movement, a 3x leveraged ETF’s two-day cumulative gain may exceed 3 times the underlying asset’s two-day gain.

Therefore, it is highly suitable for traders with a clear short-term market view who wish to amplify returns while avoiding contract liquidation risk, making it ideal for short-term trend trading.

03 Key Risks and Cost Analysis

High returns are inevitably accompanied by high risks. Understanding the inherent risks and cost structure of Gate Leveraged ETFs is fundamental to using this tool rationally.

The primary risk comes from volatility amplification and rebalancing decay. Leverage is a double-edged sword that magnifies both gains and losses. More importantly, in a directionless choppy market, frequent daily rebalancing leads to “decay.”

For example, if the underlying asset price rises and then falls back to the starting point, the leveraged ETF’s net asset value will usually be lower than the initial value, and this loss accumulates over long periods of sideways movement.

Therefore, almost all documentation clearly states that leveraged ETFs are not suitable for long-term holding; they are designed as short-term trend trading tools.

Another cost is the daily 0.1% management fee. This fee covers the perpetual contract fees, funding rates, and rebalancing slippage costs behind the system.

Although Gate currently absorbs part of the cost to keep the rate at an industry-low level, investors must factor this fixed expense into their potential returns.

04 Practical Guide and Naming Rules

Understanding how to identify and trade these products is the first step in practice.

Gate Leveraged ETF naming rules are intuitive and clear, generally following the format “underlying asset + leverage multiple + direction.”

• BTC3L: Represents Bitcoin 3x long. L stands for Long.
• ETH3S: Represents Ethereum 3x short. S stands for Short.

The trading process is exactly the same as spot trading. Users simply find the corresponding leveraged ETF trading pair (such as BTC3L/USDT) in the Gate spot trading market to buy or sell, with no need for margin or monitoring liquidation prices.

Investment decisions should be based on a short-term outlook for the underlying asset. If you are bullish on BTC for the next one or two days, you can buy BTC3L; if you expect ETH to fall, you can buy ETH3S to profit.

05 Comparison with Traditional Leverage and Spot

To help investors build a clearer understanding, the table below compares Gate Leveraged ETF with traditional margin contracts and simply holding spot, revealing their key differences.

As seen from the comparison, leveraged ETFs have unique advantages in simplifying operations and eliminating liquidation risk, but at the cost of giving up long-term holding flexibility and customizable leverage.

Outlook

Returning to the initial scenario, the trader who achieved excess returns in a trending market with Gate 3x Leveraged ETFs did not succeed by chance. He accurately leveraged the product’s compounding advantage in trends and strictly adhered to the core discipline of “short-term holding, trend trading.”

When he exited the trade, he clearly knew that the daily 0.1% management fee he paid was the price for “peace of mind with no liquidation risk” and “precise automated rebalancing.” This peace of mind and precision are the succinct presentation of complex financial engineering at the individual investor’s interface.