Understanding NAV and Price
ETF leveraged tokens function like a fund. Although they are traded similarly to spot assets, they represent fund shares rather than actual cryptocurrency holdings.
For example, if you purchase 300 BTC3L tokens at 1 USDT each, you now hold 300 USDT worth of BTC3L ETF shares. However, these are not equivalent to 300 USDT worth of BTC spot assets. Instead, the 1 USDT price represents the Net Asset Value (NAV) of BTC3L, not the BTC spot price.
NAV Calculation
NAV (Net Asset Value) reflects the fair market value of each ETF token and determines the trading price. It is calculated as follows:
NAV = Previous Rebalance NAV x (1 + Underlying Asset Change x Leverage Multiplier)
Each time rebalancing occurs, the NAV calculation baseline changes.
Example:
- At 00:00 UTC+8, the NAV is 1 USDT .
- The NAV fluctuates with the price movement of the underlying asset.
- If the NAV drops to 0.7 USDT , and a rebalancing event is triggered, the new baseline becomes 0.7 USDT .
- The NAV then continues to update based on the formula using 0.7 USDT as the new reference point.
Notes on NAV Rebalancing:
- The previous rebalance NAV is the last adjusted NAV when an irregular rebalancing event occurred (e.g., when the leverage ratio exceeded 3x or the price moved ±20% from the last rebalance). If no irregular rebalancing happens within 24 hours, the NAV from 00:00 UTC+8 is used.
Market Price vs. NAV:
- The actual trading price of ETF tokens in the secondary market is anchored to NAV but may slightly deviate due to supply and demand.
- Example: If BTC3L has a NAV of 1 USDT, its market price could be 1.01 USDT or 0.99 USDT.
- Investors should avoid trading at excessive premiums or discounts relative to NAV to prevent potential losses.
NAV Splitting and Merging
To improve trading experience and price sensitivity, Gate may perform NAV splitting or merging at certain thresholds.
NAV Adjustment Rules:
If the NAV falls below a threshold , a merging operation is conducted:
- NAV is multiplied by N.
- ETF token quantity is divided by N.
If the NAV rises above a threshold , a splitting operation is conducted:
- NAV is divided by N.
- ETF token quantity is multiplied by N.
Example:
- You have 1,000 units of an ETF token, each worth 1 USDT , totaling 1,000 USDT .
- If a merger occurs at a 100:1 ratio, your holdings will change to 10 units , each worth 100 USDT , maintaining the total value at 1,000 USDT .
- This does not affect the overall value of your holdings—only the unit count and NAV change.
Final Notes:
Due to market fluctuations, ETF token prices may experience temporary NAV premiums or discounts . When placing orders, ensure the trading price does not deviate significantly from NAV to avoid losses.