What is XT ETF?

1. What is XT ETF?

XT ETF refers to fund products that track the price performance of underlying assets using financial derivatives such as futures. These products magnify the performance by a certain multiple. In essence, XT ETF amplifies the returns of ordinary digital assets several times. An example would be when the target asset's returns change by 1%, the change in the net asset value of the fund will reach the target multiplier, such as 1.5%, 2%, or 3%. When the leverage ratio is 1x, XT ETF would essentially be equivalent to traditional digital assets.

In traditional finance, assets tracked often consist of a combination of various stock indices. However, XT ETF tracks and amplifies the spot price performance of a single type of digital currency as its underlying asset. For instance, XT ETF trading pairs such as BTC3L and BTC3S indicate that when the spot price of BTC rises by 1%, BTC3L will rise by 3%, while BTC3S will fall by 3%.

2. The Working Principle of XT ETF:

XT ETF is essentially a fund that managed by a professional financial team. Each ETF variety is backed by a certain number of futures positions. Fund managers dynamically adjust futures positions through a rebalancing mechanism to maintain a fixed leverage multiple of the fund's net asset value over a certain period (daily), thereby achieving amplified returns.

When trading ETF products on the XT platform, users purchase the corresponding net asset values rather than the spot prices of digital currencies. The fluctuations in ETF products with fixed leverage multiples are reflected in the changes in net asset values.

3. The main features of XT ETF include:

1. XT ETF is a perpetual product with no expiration or settlement date, which allows users to buy or sell at any time.
2. The trading mechanism is similar to spot trading in cryptocurrencies. Users can participate directly without the need for margin or any form of collateral assets, thus eliminating the risk of liquidation.
3. Due to the ETF's rebalancing mechanism, ETF products are suitable for markets characterized by one-sided trends, also known as trending markets. In such market conditions, the compounding effect generated by the ETF can help users amplify their returns.
4. During periods of high market volatility, the rebalancing mechanism can lead to significant losses in the value of the ETF.