An ETF is essentially a type of fund product. Although its trading mechanism is similar to spot trading, when users buy or sell ETF products on Gate, they are not trading the digital asset spot itself, but fund shares of the corresponding ETF product.
Therefore, the trading price users see when buying or selling an ETF product is not the same as the spot price of the underlying asset. Instead, it is the trading price of the ETF product in the secondary market. The value of an ETF product is mainly reflected through its fund NAV.
For example, take BTC3L as an ETF product. Assume a user buys 300 BTC3L at a price of 1 USDT, meaning they currently hold BTC3L worth 300 USDT. In this example, the user holds fund shares of the BTC3L ETF product, not BTC spot worth 300 USDT. The price of 1 USDT is also not the BTC spot price, but the NAV or trading price of the BTC3L ETF product.
What Is ETF NAV?
Fund NAV, or Net Asset Value (NAV), refers to the fund asset value corresponding to each unit of ETF share. It reflects the fair value of the fund assets corresponding to each unit of ETF share currently held by the user, and is also an important reference when users buy or sell ETF products.
ETF NAV is affected by factors such as changes in the underlying contract index price, the product’s target leverage ratio, rebalancing, management fees, and related trading costs.
The underlying contract index price refers to the index price of the underlying contract corresponding to the ETF. It is not the spot price of the underlying asset, nor is it the latest transaction price of the ETF in the secondary market. ETF NAV calculation and rebalancing judgment are usually based on the underlying contract index price.
How Is ETF NAV Calculated?
For ETF products with different leverage multiples and directions, the NAV is calculated based on the benchmark after the most recent rebalancing.
A simplified calculation is as follows:
Current NAV = NAV at the Previous Rebalancing × [1 + Target Leverage Ratio × Change in Underlying Contract Index Price]
Where:
Change in Underlying Contract Index Price = (Current Underlying Contract Index Price - Underlying Contract Index Price at the Previous Rebalancing) / Underlying Contract Index Price at the Previous Rebalancing
It can also be written as:
Current NAV = NAV at the Previous Rebalancing × [1 + Target Leverage Ratio × (Current Underlying Contract Index Price - Underlying Contract Index Price at the Previous Rebalancing) / Underlying Contract Index Price at the Previous Rebalancing]
Here, the “target leverage ratio” is the leverage multiple set by the product and includes direction:
| ETF Type | Target Leverage Direction | When the Underlying Rises | When the Underlying Falls |
|---|---|---|---|
| Long ETF, such as 3L and 5L | Positive | NAV rises | NAV falls |
| Short ETF, such as 3S and 5S | Negative | NAV falls | NAV rises |
For example, the target leverage ratio of BTC3L is +3, while that of BTC3S is -3.
Assume the NAV of a 3x long ETF at the previous rebalancing was 1 USDT, and the underlying contract index price at the previous rebalancing was 100 USDT. If the current underlying contract index price rises to 105 USDT, meaning the underlying contract index price rises by 5%, the theoretical NAV change is approximately:
1 × [1 + 3 × 5%] = 1.15 USDT
If it is a 3x short ETF under the same conditions, the theoretical NAV change is approximately:
1 × [1 - 3 × 5%] = 0.85 USDT
Please note that after each ETF rebalancing, the system uses the NAV and underlying contract index price after that rebalancing as the new calculation benchmark. Subsequent NAV changes will continue to be calculated based on the new rebalancing benchmark.
In addition, ETFs accrue management fees according to the rules, and the related fees are deducted from the ETF NAV. Therefore, with other conditions unchanged, the NAV may decrease slightly over the holding period. The specific fee rate is subject to the product page.
The above is a simplified example for easier understanding. The actual NAV may also be affected by factors such as rebalancing, trading costs, funding rates, and market liquidity.
How to Understand ETF Real-Time Leverage Ratio?
The ETF real-time leverage ratio refers to the actual leverage multiple calculated relative to the current NAV.
Because the underlying contract index price fluctuates continuously, the ETF’s current NAV also changes accordingly. As a result, the ETF’s actual leverage ratio does not always equal the product’s target leverage ratio. For example, a 3x ETF has a target leverage ratio of 3x, but after market fluctuations, its actual leverage ratio may be higher or lower than 3x.
A simplified understanding of the real-time leverage ratio is as follows:
Real-Time Leverage Ratio = NAV at the Previous Rebalancing / Current NAV × Current Underlying Contract Index Price / Underlying Contract Index Price at the Previous Rebalancing × Target Leverage Ratio
Here, the “target leverage ratio” also includes direction:
- The target leverage ratio of a long ETF is positive.
- The target leverage ratio of a short ETF is negative.
Therefore, the calculated real-time leverage ratio also includes direction. However, when determining whether rebalancing is triggered or when comparing it with the upper and lower leverage limits, the absolute value of the real-time leverage multiple is usually referenced.
When the underlying contract index price and ETF NAV return to the corresponding state at the time of the previous rebalancing, the real-time leverage ratio will be close to the product’s target leverage ratio, meaning it returns to the target leverage level.
What Is the Difference Between ETF NAV and Trading Price?
ETF NAV reflects the fund asset value corresponding to each unit of ETF share, while the ETF trading price is the transaction price formed when users buy or sell ETF products in the secondary market.
Under normal circumstances, the ETF trading price fluctuates around the NAV, but the two are not necessarily exactly the same. Due to factors such as market supply and demand, liquidity, order book depth, and market volatility, the ETF trading price may trade at a premium or discount relative to the NAV.
For example, when the NAV of BTC3L is 1 USDT, the actual trading price in the secondary market may be 1.01 USDT or 0.99 USDT.
Gate displays both the ETF NAV and the latest transaction price. Before buying or selling ETF products, users should pay attention to the difference between the trading price and NAV to avoid unnecessary losses caused by large price deviations.
ETF NAV Split and Consolidation
To lower the trading threshold for users, improve the sensitivity of ETF NAV price changes, and optimize the trading experience, Gate may split or consolidate the NAV of certain ETF products.
ETF NAV split or consolidation only affects the ETF’s unit NAV and the number of shares held by users. It does not change the total value of ETF assets held by users. When a NAV split or consolidation occurs, Gate will promptly announce it to users and display the relevant records.
ETF NAV Split and Consolidation Rules
When the NAV of certain ETF products falls below a certain threshold, Gate may consolidate the ETF product. After consolidation, the ETF’s unit NAV will increase proportionally, and the number of ETF shares held by users will decrease by the same proportion.
For example, a user holds 1,000 shares of an ETF, and the NAV per share is 0.001 USDT, with a total value of 1 USDT. If the ETF undergoes a 1,000:1 consolidation, the user will hold 1 share after consolidation, with a NAV of 1 USDT per share, while the total value remains 1 USDT.
When the NAV of certain ETF products rises above a certain threshold, Gate may split the ETF product. After the split, the ETF’s unit NAV will decrease proportionally, and the number of ETF shares held by users will increase by the same proportion.
For example, a user holds 1 share of an ETF, and the NAV per share is 1,000 USDT, with a total value of 1,000 USDT. If the ETF undergoes a 1:1,000 split, the user will hold 1,000 shares after the split, with a NAV of 1 USDT per share, while the total value remains 1,000 USDT.
Please note that due to continuous market fluctuations, the ETF NAV and trading price may still change before and after a split or consolidation. When placing orders, users should pay attention to the latest NAV, latest transaction price, and order book conditions, and try to avoid trading when the price significantly deviates from the NAV.
Disclaimer
The content provided herein is for reference and educational purposes only and does not constitute any financial, investment, trading, or legal advice, nor does it constitute an offer or solicitation to buy or sell any digital assets. Gate makes no express or implied representations or warranties regarding the accuracy, completeness, or timeliness of the information contained herein. Product features, interfaces, rules, and fee structures may be updated or adjusted at any time. Please refer to the latest announcements and the actual information displayed on the Gate platform for the most accurate details.
Digital asset investments involve significant risk, and prices may fluctuate substantially. You may lose the entire amount of your investment. Please make decisions cautiously based on your own financial situation and risk tolerance after fully understanding the associated risks. If necessary, you are advised to consult an independent professional financial or legal advisor.
For more information about potential risks, please refer to Gate's Risk Disclosure and User Agreement.
