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To start trading with leveraged tokens on the Binance exchange, you’ll need to take the Binance Leverage Token Quiz before you can begin. This is a test of your understanding and knowledge of trading with leverage tokens, including the risks associated, fees and responsibilities.
Until you pass the Binance Leveraged Tokens Quiz, you cannot trade any leveraged tokens. Whilst the test is relatively straightforward, this requirement can create problems for many crypto investors who want to start trading Leverage Tokens.
So, let’s dive into this Binance guide, which provides everything you need to answer the Binance Leverage Token questions for 2024.
Binance Leverage Token Quiz Answers for 2024
Below, we have compiled the latest answers to the 11 questions for the Binance Leverage Token Quiz. Once the quiz has been completed, you can start trading with leverage tokens.
To take the Binance Leverage Token quiz first, you must have access to the desktop version of Binance (Binance.com), as questions may vary otherwise.
Binance Leverage Token Quiz Question 1: Binance Leveraged Tokens
Question 1: What is Binance Leveraged Tokens?
Answer Options:
- Binance Leveraged Tokens is a financial derivative which is similar in nature to traditional leveraged ETFs. Their net asset value may be greatly worn out by short-term market fluctuations. Long term holding of Binance Leveraged Tokens is risky and users should minimise the losses by selling the leveraged tokens from time to time.
- Binance Leveraged Tokens is a cryptocurrency which you can withdraw the tokens out anytime.
- Binance Leveraged Tokens is a futures contract which you adjust leverage level from time to time.
Binance Leverage Token Quiz Answer 1: Binance Leveraged Tokens is a financial derivative which is similar in nature to traditional leveraged ETFs. Their net asset value may be greatly worn out by short-term market fluctuations. Long term holding of Binance Leveraged Tokens is risky and users should minimise the losses by selling the leveraged tokens from time to time.
Binance Leverage Token Quiz Question 2: Leverage Multiplier
Question 2: What is the leverage multiplier for Binance Leveraged Tokens?
Answer Options:
- The system maintains a target leverage range between 1.25x and 4x
- It is always 4x
- It is always 1.25x
Binance Leverage Token Answer 2: The system maintains a target leverage range between 1.25x and 4x.
Binance Leverage Token Quiz Question 3: Token Rebalance
Question 3: When does Binance Leveraged Tokens rebalance?
Answer Options:
- Every 8 hours
- Every day
- When the market is volatile or the actual leverage multiplier is out of the target leverage range.
Binance Leverage Token Answer 3: When the market is volatile or the actual leverage multiplier is out of the target leverage range.
Binance Leverage Token Quiz Question 4: Holding Binance Leverage Tokens Long Term
Question 4: What is the worst case scenario of holding Binance Leveraged Tokens on a long term basis?
Answer Options:
- Binance Leveraged Tokens is a good store of value and the value will increase over time.
- Users can receive interest income for holding Binance Leveraged Tokens on a long term basis.
- The value of Binance Leveraged Tokens can become zero (0) and cannot be recovered due to inherent market risks, high fees, slippage, rebalance algorithm frontrunning and any other perceived unknown risks associated with Binance Leveraged Tokens.
Binance Leverage Token Answer 4: The value of Binance Leveraged Tokens can become zero (0) and cannot be recovered due to inherent market risks, high fees, slippage, rebalance algorithm frontrunning and any other perceived unknown risks associated with Binance Leveraged Tokens.
Binance Leverage Token Quiz Question 5: Binance Leverage Tokens Fees
Question 5: Which one of these fees is NOT associated with Binance Leveraged Tokens?
Answer Options:
- Asset custody fees
- Trading fees
- Subscription and redemption fees
Binance Leverage Token Answer 5: Asset custody fees
Binance Leverage Token Quiz Question 6: Costs NOT Associated with Binance Leverage Tokens
Question 6: Which one of these is NOT a cost associated with holding Binance Leveraged Tokens?
Answer Options:
- Daily management fees and reflected directly in the net asset value of the Binance Leveraged Tokens.
- Funding fees for basket positions and reflected directly in the net asset value of the Binance Leveraged Tokens.
- Profit sharing fees
Binance Leverage Token Answer 6: Profit sharing fees
7Binance Leverage Token Quiz Question 7: Risks of Holding Binance Leverage Tokens Long-Term
Question 7: By trading Binance Leveraged Tokens, you do not need to maintain margin maintenance and worry about the liquidation risk. However, Binance Leveraged Tokens is not completely risk-free. Which one of these is NOT a risk associated with holding Binance Leveraged Tokens long-term?
Answer Options:
- Continuing to be charged management fees and funding fees.
- Erosion of net asset value (NAV) due to rebalancing and volatility decay when there is no obvious trend in the market.
- Receiving interest payment
Binance Leverage Token Answer 7: Receiving interest payment
Binance Leverage Token Quiz Question 8: Subscription and Redemption of Binance Leverage Tokens
Question 8: Why are subscription and redemption of Binance Leveraged Tokens not recommended during normal trading time?
Answer Options:
- Subscription and redemption fees are higher than trading fees and there is a limit on how many leveraged tokens users can subscribe or redeem daily.
- Binance Leveraged Tokens is a cryptocurrency which you can withdraw the tokens out anytime.
Binance Leverage Token Answer 8: Subscription and redemption fees are higher than trading fees and there is a limit on how many leveraged tokens users can subscribe or redeem daily.
Binance Leverage Token Quiz Question 9: Requirement for Binance Leverage Tokens
Question 9: Which one of these actions is NOT required to complete before trading Binance Leveraged Tokens?
Answer Options:
- Opening a Margin Account.
- Completing the Binance Leveraged Token questionnaire and agreeing to the terms and conditions in the Binance Leveraged Token Risk Disclosure.
Binance Leverage Token Answer 9: Opening a Margin Account
Binance Leverage Token Quiz Question 10: Responsible Trader
Question 10: What would a responsible trader likely do, if they incur consecutive losses?
Answer Options:
- Continue trading until they earn back their capital.
- Cut losses timely and control risk exposure.
Binance Leverage Token Answer 10: Cut losses timely and control risk exposure.
Binance Leverage Token Quiz Question 11: Understanding the Risks
Question 11: As a leveraged tokens trader, you should fully understand the risks associated with leveraged tokens trading and solely responsible and liable for any losses associated with trading activities on your account.
Answer Options:
- Yes, I agree
- No, I disagree
Binance Leverage Token Answer 11: Yes, I agree
What is a Binance Leverage Token?
Binance Leveraged Tokens are a form of derivative that allows you to gain leveraged exposure to the underlying asset. Like all other types of tokens, leveraged tokens can be exchanged on the spot market. Each leveraged token represents a basket of perpetual contract holdings. The price of a leveraged token fluctuates in tandem with the price of perpetual contracts, and the leverage level also fluctuates.
Before trading, it is necessary to know about leverage token trading; therefore, new users must complete a Binance Leverage Token Quiz.
How do Leveraged Tokens Work?
Leveraged tokens are financial derivatives that allow you to take a leveraged position in a cryptocurrency, meaning your earnings or losses are multiplied. They enable you to gain exposure to a leveraged trading position in a digital asset without the complexities of managing a margin trade.
There are long (bull) and short (bear) leveraged tokens. Long leveraged tokens bet on the underlying asset’s price going up, while short leveraged tokens bet on the price going down. There are also fixed and variable leverage tokens, which differ in the degree of leverage applied.
Leveraged tokens are a fund that tracks and magnifies the cryptocurrencies’ P&L and price movement. For example, buying a 3x long Bitcoin token (BTC3L) would result in a 30% return if the price of the underlying BTCUSDT rises by 10%.
These tokens are usually ERC20 tokens representing a leveraged long or short position in a crypto asset. Leveraged tokens enable crypto traders to access leverage without dealing with margin requirements and collateral management typically associated with leveraged trading.
What is the Risk of Binance Leverage Tokens?
Binance leveraged tokens carry several risks that investors should know before trading. Some of the risks associated with Binance leveraged tokens include:
- Inherent Market Risks: The value of Binance leveraged tokens can become zero (0) and cannot be recovered due to the unpredictable nature of the market.
- High Fees: Leveraged tokens, including those on Binance, often come with high fees, which can significantly impact your returns.
- Slippage: The difference between the expected price of a trade and the actual price at which it’s executed can result in losses for leveraged token traders.
- Rebalance Algorithm Frontrunning: The rebalancing process of leveraged tokens can impact their price, making them susceptible to frontrunning, where traders exploit the knowledge of impending rebalancing to manipulate token prices.
Additionally, it’s important to note that Binance leveraged tokens eliminate the need for collateral or margin maintenance, which can be seen as a benefit. However, this also means that they carry the risk of liquidation. Due to these risks, it’s recommended to treat leveraged tokens as short-term investment vehicles and to carefully assess the risks before trading them.
Conclusion
After completing the quiz, you will be able to start trading leverage tokens in Binance. Remember that leverage tokens cannot be withdrawn.
Trading leveraged tokens come with its own set of fees. A 0.1 per cent subscription fee, a 0.1 per cent redemption fee, and a 0.01 per cent daily administration fee are included.
FAQs
Can I withdraw Binance Leveraged Tokens?
Binance Leveraged Tokens are not withdrawable and can only be stored on your Binance account.
