Leveraging Exchange Tokens

How to use exchange tokens to boost your portfolio ROI

The majority of big exchanges have their tokens. These tokens have some really important features, such as Trading fees discounts & IEO participation;

On different exchanges, fees discounts can go as high as 50%, representing a huge benefit for even a small trader. 

On top of that, if you want to participate in IEOs, long-term holding strategy gives you more ROI (Return on investment), against buying tokens (such as BNB) before IEO, because IEO announcement is immediately followed by price spike. Sometimes, due to information asymmetry, you can notice the price going through the roof 1-2 days before the announcement.

On the other hand, after the IEO end, exchange tokens drop in price. All these factors contribute to the decrease in ROI. Hence, holding exchange tokens through multiple IEOs is a better strategy.

High risk

At the same time, holding exchange tokens is associated with some risks. According to the Cryptonomist, about 20 exchanges have closed their doors during 2019. Since the crypto price is still in the sideways movement, volumes and interest from retail are not there yet. So we can anticipate more consolidation.

Using crypto loans to optimize your returns

In our other post, we compared different crypto lending services for Long vs Short term loans, and obviously, Squilla.Loans is one of the best choices in this case.

But what is the exact strategy?

We examined the dynamics of prices for tokens of one of the most popular exchanges since the begging of 2019: Binance, Bitfinex, Okex, Huobi, Synthetix, Kucoin, FTX. All of them show heterogeneous dynamics, but one way or another, all pairs of exchange tokens against the dollar directly correlate to the price of bitcoin.

Let’s say we assembled a portfolio of $ 1000 in equal shares with these exchange tokens on January 1, 2019 (LEO Bitfinex and FTT tokens of the FTX exchange appeared a bit later in our portfolio).

We calculated the profit on December 25, 2019. Our $ 1,000 turned into $ 3,762 (excluding commissions). Similarly, investing only in bitcoin, we would get a return of $ 1955. The difference in profit is very significant $ 3762 – $ 1955 = $ 1807, almost a return on the portfolio with bitcoins for the year.