Leveraged tokens aim to amplify returns but their rebalancing mechanisms have critical flaws. Daily rebalancing adjusts exposure to maintain leverage ratios, yet in volatile markets, this can erode value through slippage and compounding losses. Unlike futures, tokens don't allow holding positions without frequent adjustments, leading to tracking errors against the underlying asset. High volatility triggers over-rebalancing, misaligning with long-term goals. Fees from constant trading further diminish returns, especially in sideways markets. Investors often misjudge these tokens as simple leveraged bets, unaware of decay risks. While designed for short-term trading, the mechanism's complexity and costs make them less suitable for retail investors, undermining their appeal compared to traditional leveraged instruments.