Here is being presented the new leverage that Binance is launching for its Bitcoin-Tether Futures, increasing to 125% of the original value.
As it has been observed in recent months, particularly in the month of October, the subject of Bitcoin Futures has been controversial, with accusations that hit the entire market or praises for being a financial innovation. It has been highlighted that the main representative of the subject was Bakkt, until the appearance of Binance as a competitor. Today’s news is that Binance has recently announced a new leverage for Bitcoin-Tether Futures.
As of last Friday, October 18th, futures traders on their platform have been able to choose leveraged positions between 1x and 125x. It should be noted that before this change, it could only be done up to 20x. Therefore, Binance’s leverage has increased to 625% of what it was before.
It has been seen that there is an increase in institutional participation in the trade of Bitcoin-Tether futures. The CEO of Binance Changpeng “CZ” Zhao said that institutions are flocking to Binance futures. The firm is providing a product with superior stability and performance, since the market has been demanding one.
Leading economist and cryptographic skeptic Nouriel Roubini has previously argued that, by providing such high leverage, platforms expose traders to too high a risk.
Considering that, the greater the leverage, when a fall occurs, this loss is equivalent to the leverage. What Roubini raises is that this 125x affects both possible gains and losses.
When it was the right time, Binance responded that its Bitcoin Futures contract provides a built-in hedging tool to help operators manage that risk. In addition, the exchange said that it is providing an “insurance fund.” According to them, this helps limit the possibilities of automatic deleveraging.
This announcement comes in the midst of tighter competition in the Bitcoin Futures space. The Intercontinental Exchange Bakkt Futures market had its launch in September. Although the initial volume of the exchange disappointed critics, the exchange has already made its first block exchange for two institutional investors.
As stated in the previous paragraph and at the beginning of the article, the Bitcoin Futures market is currently in a state of uncertainty. According to Nouriel Roubini himself, it is normal that in new financial markets people begin to seek to understand it.
However, he highlights that it is advisable to learn from past mistakes, highlighting again the issue of risk with high leverage such as that of Binance.
Binance’s leverage increase since October 18th has led many institutions to massively enter into the trade of Binance futures. There is now a product with much better stability and performance, which is aimed at meeting the demands of the market.
Although traders are at risk with the high leverage, Bitcoin Futures contract provides a tool for managing that situation. Besides, Binance has made a block exchange for two institutional investors, which adds to the reasons for investors to trust the exchange platform.
Despite the uncertainty in the Bitcoin Futures market, investors are advised to understand that that kind of issues normally occur.
By Willmen Blanco