Tech

FTX, a cryptocurrency leader, works to curb high-risk transactions

Popular crypto exchanges with Bitcoin on Sunday A casino-like atmosphere on such platforms around the world.

The move by the exchange FTX will reduce the size of bets that investors can make by reducing the amount of leverage they offer from 101x to 20x. Leverage doubles the trader’s chances of loss as well as profit.

“We are the first to take the first step here,” said Sam Bankman Fried, 29, the founder of Platform billionaires operating in Hong Kong. Said on twitter on sunday.. “Today we are removing high leverage from FTX. The maximum tolerance is 20x.”

The announcement came after the New York Times, In an article published online on FridayElaborated on high-risk transactions offered on FTX and other global exchanges such as Binance and BitMEX, which accelerated the global crash in May. That month, over $ 20 billion of these bets were settled on crypto exchanges around the world.

“Lower leverage is” a step in the direction of the industry and has been going on for some time, “said Bankman-Fried.” Many discussions are highly leveraged, but we think. It’s unmarked, and I don’t think it’s an important part of the crypto ecosystem, and in some cases it’s not a healthy part. “

Global platforms like FTX allow traders to borrow large amounts when betting on price fluctuations. Instead of buying and selling cryptocurrencies, traders predict where the price of the underlying asset will go. These bets, known as derivatives, mean that if an investor pays $ 1,000, the exchange can extend their credits and bet on the future price of cryptocurrencies worth $ 101,000 on FTX. Now, with the new cap, the maximum transaction amount is $ 20,000.

This type of transaction is not believed to be available to non-professional investors in the United States, but at least historically, some of these investors have used workarounds to trade on the site. I did.

Leverage makes investors much more vulnerable to clearing accounts as a result of automatic margin claims if cryptocurrency prices are unexpected, and they have enough collateral to back up their bets. I don’t have in my account.

That’s what happened in May. Cryptocurrency prices start to fall based on market-moving events, such as China’s announcement of regulatory crackdowns and Tesla’s decision to suspend Bitcoin payments, the most leveraged investors before collateral becomes inadequate To cover their position, they automatically urged the exchange to liquidate their accounts.

“These liquidations are clearly a major factor in the price plunge,” recalled Clara Medary, a research leader at Cryptocurrency market data provider in Paris, who recalled a plunge in the value of cryptocurrencies in mid-May. Stated. “It’s a vicious circle.”

Bankman-Fried said on Sunday that very few traders are taking advantage of the maximum leverage available. He also argued that FTX has less liquidation than other exchanges and has long tried to “encourage responsible trading.”

Still, he predicted in an interview last week that some investors might not welcome the move to reduce leverage. “If we get rid of it, we’ll get consumer protest, and we’ll get very bad news,” he said. “But that may be right.”

Bankman-Fried also admitted that high leverage created exchange perceptions like his encouraged high-risk trading, even though he argued that this was not a fair conclusion.

Binance, the world’s largest cryptocurrency exchange, offers up to 125x leverage. Changpeng Zhao, the founder of Binance’s Chinese-Canadian and a developer who traces his professional roots to Wall Street, said that extreme leverage numbers are just “marketing gimmicks” and most traders It states that it will not use them.

Timothy Massad, a former chairman of the Commodity Futures Trading Commission that regulates US derivatives, said he accepted the FTX decision and hopes other platforms like Binance will continue.

He said this change could have been partially motivated by the success of FTX. Raised $ 900 million last week Venture capital is the largest cryptocurrency exchange in history. According to Masad, providing high leverage on the FTX is a reputable responsibility as Bankman Fried seeks to expand the global reach of the platform.

“Sam has a bigger vision, and this move eliminates the flash points that could get in the way,” Masad said. “Please remove it from the table.”



FTX, a cryptocurrency leader, works to curb high-risk transactions

Source link FTX, a cryptocurrency leader, works to curb high-risk transactions

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