Leverage is the multiplier of assets that you are able to take-on relative to your capital investment in that position.

For example, if you open a 4X long position of 4 ETH, then you will be taking on the risk of the price movement of 4 ETH but your capital investment is your margin deposit of 1 ETH. If you were to immediately close your position, you would receive your 1 ETH back (ignoring the spread of the underlying spot market).

However, if ETH increases in USD value by 25%, then the position will increase in USD value by 100%. Accounting for the increase in the price of ETH, your position is then worth (200% / 125% = 1.6) ETH if you were to close it out.

However, your position is still leveraging the price risk of 4 ETH. Therefore, your new leverage is (4 / 1.6 = 2.5). That is, the asset risk is 2.5 times higher than the underlying collateral that you continue to leave locked up.

Similarly, if your position moved against you, then your leverage would increase.

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