Gate ETF Leveraged Tokens: An Opportunity for Ordinary Users or Hidden Risks?

By the end of 2025, Gate Exchange’s ETF trading zone had generated approximately $5 billion in trading volume over the past 30 days.

In the same year, Gate completed a major upgrade to its ETF leveraged token product suite, supporting a staggering 348 trading pairs, making it one of the most widely covered platforms in the industry.

01 Gate ETF Leveraged Tokens: Product Essence

Gate ETF leveraged tokens are a type of financial derivative designed to amplify cryptocurrency investment returns. Their core design is to track the daily price fluctuations of target assets (such as BTC, ETH) and reproduce their performance at a predetermined multiple (e.g., 3x or 5x).

This is fundamentally different from traditional contracts or margin trading. When users purchase these tokens, they do not need to manage margin, calculate liquidation prices, or worry about forced liquidation due to market volatility.

The product names intuitively reveal their attributes. For example, “BTC3L” represents a long token tracking Bitcoin price with 3x leverage; “ETH5S” indicates a short token tracking Ethereum price with 5x leverage.

02 Core Operation: Auto-Rebalancing Mechanism and Double-Edged Sword Effect

Behind the promise of “no liquidation risk” is a complex auto-rebalancing mechanism in operation. This is also key to understanding the returns and risks of such products.

The mechanism rebalances at a fixed daily time (usually UTC+8 00:00). When the market experiences sharp unilateral movements, it also triggers temporary rebalancing to maintain the actual leverage ratio at the target multiple (e.g., 3x).

In sustained trending markets, this mechanism can produce a “compounding” effect, with returns potentially exceeding the theoretical value calculated by simple leverage.

For example, in a case shown by Gate’s official data, BTC rose consecutively for two days, and the final return of BTC3L was 31.4%, surpassing three times the 10% spot increase (30%).

However, in choppy markets, this mechanism can cause severe “net asset value erosion.” When the market fluctuates repeatedly up and down, the system reduces positions during declines and increases during rises. This high-frequency adjustment continuously erodes the principal.

Even if the underlying spot price eventually returns to the starting point, the leveraged token’s price may suffer significant losses due to erosion, with extreme cases exceeding 70% loss.

03 Opportunities for Ordinary Users

For ordinary users, the most immediate appeal of Gate ETF leveraged tokens lies in their ease of operation and controllable risk.

Users do not need to learn complex margin trading rules; they can operate just like spot trading to gain leveraged exposure. Meanwhile, the maximum loss is limited to the invested principal, avoiding the risk of liquidation common in contract trading.

Gate offers an extremely rich selection, supporting over 250 leveraged tokens, from mainstream BTC, ETH to various emerging tokens, satisfying diverse trading needs.

Additionally, Gate often launches trading challenge contests around newly listed leveraged tokens, such as activities for BEAT3L, BEAT3S, etc., offering sharing pools and increasing trading fun and potential returns.

04 Hidden Risks and Adaptation Challenges

Although the barrier to entry is lowered, the inherent risks of leveraged tokens do not disappear—they are just presented in a more complex form.

The fundamental amplification of two-way risks by high leverage remains unchanged. If the market moves contrary to expectations, losses can rapidly multiply by the leverage factor. Daily management fees (usually around 0.1%) continuously incur costs during holding, eroding profits or worsening losses.

The net asset value erosion caused by the rebalancing mechanism is the risk most easily overlooked and misunderstood by ordinary users. In markets with unclear direction or sideways consolidation, holding leveraged tokens long-term can lead to “dull knife cutting meat” style ongoing losses.

Therefore, these products are explicitly not suitable for medium- to long-term holding. Gate’s official materials also clearly state that due to their daily rebalancing feature, these products are recommended only for short-term market fluctuations and are suitable for experienced investors familiar with cryptocurrency market volatility.

05 Decision Guide: Are You Suitable for It?

Before considering trading Gate ETF leveraged tokens, ask yourself a few questions:

Can you accept that your principal may gradually shrink during volatile markets due to erosion mechanisms? Do you view it solely as a tactical tool for short-term clear trends rather than a long-term strategic allocation?

Is your trading discipline strict enough to exit decisively when reaching profit targets or stop-loss levels?

If you are an experienced trader capable of closely monitoring the market, with strong judgment of short-term trends, and understand the consequences of rebalancing mechanisms, then leveraged tokens can be a useful tool for capturing short-term opportunities or hedging existing positions.

If you are a beginner or ordinary investor with lower risk tolerance, unable to dedicate significant time to market analysis, then traditional spot trading or simpler products may be safer choices.

Before trading on Gate, utilize its demo trading features (if available) for practice, start with minimal amounts, and never invest assets you cannot afford to lose.

Future Outlook

Latest data shows that among Gate’s extensive ETF product matrix, tokens offering high leverage exposure such as ETH5S, ETH5L, and DOGE5L are the most actively traded.

One user holding a 3x short leveraged token in a choppy market saw her token value shrink by over 80%, despite the underlying spot price rising only about 13%.

This reminds every participant: in the seemingly convenient wealth channels of the crypto world, risks are always growing quietly with more sophisticated algorithms.