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【Observation】FTX's leveraged tokens are comparatively inferior? Binance Twitter reveals user's praise, suspected fake accounts exposed.

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【Observation】FTX

After experiencing controversy over delisting leveraged tokens from FTX citing "user protection" reasons, Binance launched its own leveraged tokens on May 14. It was believed that the issue had ended, but unexpectedly, Binance's CEO retweeted a user's praise of Binance's leveraged tokens. However, this user appeared to be a fake account based on various indications, reigniting the controversy and leading to accusations that Binance was self-promoting through manipulation.

Brief Overview of Leveraged Tokens

Leveraged tokens were originally introduced by the FTX exchange, simplifying complex leveraged contract trading rules (such as margin, funding rates, liquidation, etc.) into a single "long" or "short" token for users to trade. The token price adjusts based on the direction of the spot price, and the token price is based on the "volatility of the currency price."

During the market turmoil on March 12, liquidity issues occurred with leveraged tokens on Binance, resulting in delayed price reactions. CEO Zhao Changpeng (CZ) announced the delisting of leveraged tokens at the end of the month, citing that most users did not understand the product. Based on the principle of protecting users first, the decision to delist was made.

However, in mid-May, Binance disclosed to the media that they were about to issue their own version of leveraged tokens, BTCUP and BTCDOWN, claiming lower fees and risks, suitable for long-term holding. This move sparked controversy, with The Block's research director Larry Cermak criticizing the move, alleging that CZ's decision was profit-driven and not in line with the proclaimed user-centric principle. Today, these two figures in the cryptocurrency world clash again.

Twitter User's Praise Exposes Flaws

CZ retweeted a comparison chart of "Binance vs FTX" leveraged tokens posted by a user on Twitter today, claiming that protecting users was not just talk.

https://twitter.com/cz_binance/status/1269802232368623616

The user, named @JasonCrypt, compared the returns of both long and short leveraged tokens from the 14th, showing that the upper part of the chart (Avg Cum Return) represents the average cumulative return rate. The FTX leveraged tokens continued to expand losses, while Binance's version appeared to be more in line with the principles of leveraged trading. The lower part of the chart (Cum Return) compares the returns of holding both long and short leveraged tokens separately, indicating that Binance had less volatility than FTX.

Larry Cermak quickly noticed CZ's tweet and raised some doubts:

"Why would an account that has only posted 3 tweets suddenly publish a post about the performance of Binance's leveraged tokens? For anyone familiar with leveraged tokens, they should not be held long-term but only traded short-term. Only fools would compare the long-term performance of leveraged tokens." Larry criticized.

It was also noted that the comparison was based on different standards. According to a Binance announcement, Binance's leveraged tokens have a variable leverage rate (1.5~3x), while FTX's version has a fixed leverage rate (3x). This observation aligns with Su Zhu, a fixed columnist for Bitcoin options leader Deribit, who pointed out that at a certain period, Binance's product performed 14% worse than FTX's. He believed this was because Binance initially used lower leverage and then intervened artificially to achieve better performance later on.

Suspected Creation of Fake Accounts

Larry further stated:

It seems that Binance has started to fabricate. This user is a new account with almost no followers, only 3 tweets. The post was immediately retweeted by CZ within minutes, praising their leveraged tokens.

It was also found that this account joined Twitter in March this year, with only 192 followers, and the first post was made yesterday.

As of now, CZ has not responded, and Larry emphasized: I focus on Binance's affairs, which does not mean OKEx and Huobi won't experience similar events. In fact, other exchanges are often worse and operate in a more centralized manner, with a lot of forgery. It's just that Binance receives much more attention compared to others.