BTCUP and ETHDOWN are Binance leveraged tokens. Essentially, they’re derivative products and not the actual cryptocurrency. This is because their value is derived and depends on an underlying instrument (in this case, the actual price of BTC and ETH). This means that the prices of these products will move in line with the price of the underlying tokens that they are tracking.
One important thing to note is that if you buy BTCUP or ETHDOWN, you do not own the underlying tokens (the actual BTC or ETH tokens). This implies that you cannot transfer your BTCUP tokens via the BTC network. Furthermore, you cannot withdraw your ETHDOWN tokens in order to stake them. With Binance leverage tokens (BTCUP and ETHDOWN), you’re just betting on the price movement of the underlying cryptocurrency.
How do BTCUP and ETHDOWN work?
Although the value of these tokens depends on the underlying token (the value of BTC and ETH), their values are actually leveraged. They range from 1.25 to 4 times the movement of the underlying token. Hence, both tokens will give you extra price movements.
The leverage simply magnifies a token’s movements. So, for every 1% that the underlying token moves, BTCUP and ETHDOWN will move 1.25–4 times as much as the underlying token.
Trading BTCUP is actually a way to bet on the price of BTC going up. So you benefit when the price of BTC appreciates. Similarly, trading ETHDOWN is a way to bet on the price of ETH if you believe the price will decline. This is similar to longing or shorting a stock in the stock market so you can benefit from the price movement without owning the asset.
Considering the image above, we can see that the leverage of BTCUP is 1.838X. This means that if the underlying token (BTC) moves up by 1%, this token (BTCUP) will move up 1.838%
If you are confident that BTC will be bullish (move up), then you can earn more money when you purchase BTCUP than by buying the underlying asset. If BTC goes up, you would then get more from your trade. But there is more to this. Things can go south if your speculation is wrong and BTC moves down. This means your investment will LOSE more than if you just bought the underlying (BTC).
From the image above, we can see that the leverage of ETHDOWN is 1.890X. This means that if the underlying token, which is ETH, moves down by 1%, this token (ETHDOWN) will decline by 1.890%.
You are confident that ETH will decline in price. So, you’ll get a good deal if you get your speculation right. After you purchase ETHDOWN and ETH declines, then that’s profitable. You’ll gain more from your trade as compared to if you bought the underlying asset. But, the reverse is the case if ETH moves up. It means your investment will be down than if you just bought the underlying ETH.
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