FTX and Binance Futures reduce leverage to 20x, prioritizing consumer protection
2 min readTwo of the leading crypto derivatives trading platforms – FTX and Binance Futures – reduce leverage to 20x.
With pace-building regulatory measures around the world, FTX and other crypto-exchanges are taking key action on excessive leverage to prevent regulatory actions.
One week after the largest funding in history, the FTX crypto exchange decided to lower the limit for margin trading. It is said to protect this step from the coming regulatory storm. On Sunday, July 25, FTX CEO Sam Bankman-Fried announced a notice to limit the amount for margin trading. The leverage effect on FTX has therefore fallen from 100 times before to now only 20 times. This is a big step and can potentially play a major role in daily trading volumes. Bankman-Fried said:
“An efficient margin system is an integral part, but there are limits to everything. “
There are concerns that higher leverage has a major impact on market volatility. However, the CEO of FTX refuted this claim, saying that it formed only a small part of the company’s business. In his recent twitter thread Bankman-Fried noted that less than 1% of FTX volumes came from margin calls. In contrast, there are several exchanges where it contributes 5% to the total volume.
Thus, the CEO of FTX stated that his company only supports “responsible trading”. He added that FTX product and margin systems are intended only for “sophisticated users”.
“There has been a lot of discussion about high leverage recently (> 20x). Almost every crypto exchange allows this, and almost each says the same thing: It’s a tiny fraction of volume and position. And so, after a lot of “here and there”, we will be the first to take the first step in the direction of the industry. Today we are removing the high lever from FTX. The maximum permissible value will be 20 times,” he wrote.
Binance Futures has also reduced margin trading
Soon after the SBF’s tweets, Binance CEO Changpeng Zhao tweeted that his Binance exchange had already reduced margin trading. CZ wrote:
“Binance Futures has started to limit new users to a maximum of 20 times the leverage from last Monday, July 19. (We didn’t want to make it an event). In the interest of consumer protection, we will gradually apply this to existing users in the next few weeks. ”
Binance has faced criticism from regulators around the world over the past month. Last week, Binance suspended trading with stock tokens just three months after launch.
Returning to the FTX, the SBF noted that the exchange has some great announcements in the future. With the massive fundraising, the stock exchange plans to expand its operations. FTX’s CEO said most of the funds would be used in key acquisitions. Sam Bankman-Fried also showed a desire for a possible listing on Wall Street.
