What are the risks when trading leveraged tokens?
When the price of Pionex leveraged tokens falls below 0.05, or when the price fluctuates substantially below 0.05, the reverse spilt mechanism will be triggered. The reverse spilt multiples are generally 20, 30, 50 times, etc. Let us take 50 times as an example. Before the reverse spilting, assume that the user holds 1000 leveraged tokens, the net value of the token is 0.03, and the corresponding asset is 30 USDT. After the reverse spilt, the user holds 20 leveraged tokens (1000/50=20), and the net value of the token is 1.5 ( 0.03*50=1.5), the corresponding asset is 30 USDT. The reverse spilt will not affect the total assets, but it will reduce the number of positions held. Therefore, it is not recommended to buy when the net value of the token is low. The price of the token can continue falling due to reverse spilting.
Pionex Leveraged Token can avoid liquidation, but if you misjudge the market and the price increases/decreases to the opposite direction, you may lose a lot. Even if the price returns to the normal range again, due to rebalancing mechanism, the price needs to increase/decrease more to cover the loss.
Therefore, Pionex Leveraged Tokens are more suitable for short-term investment while long-term holdings will increase the risk of loss. In addition, there may be a situation where both Long and Short Leveraged Tokens lose at the same time in the extreme fluctuation, please pay attention to investment risks.