FAQ
Last updated
Last updated
The primary differentiator to perpetual futures is that leveraged tokens maintain their leverage factor within a target range. They achieve this by reactively rebalancing the amount of borrowed funds.
One use case of leverage tokens is to minimize the necessity for margin management, i.e. monitoring the margin-to-notional ratio and adjusting the leverage to prevent liquidation.
Yes, in theory, leveraged tokens can face liquidation if keepers cannot rebalance a position quickly enough in response to sudden, large price movements. In the case of a liquidation, the value of a leveraged token would become zero, and a new leveraged token contract would be deployed.
The Return on Investment (ROI) might be lower than expected due to factors such as volatility decay, rebalancing costs, or Synthetix fees, such as a high funding rate.