The crypto-derivatives exchange FTX has cut the maximum leverage available to its clients, limiting it to 20x. According to the platform’s founder, Sam Bankman-Fried, the move came as there was little demand for high leverage among traders.
9) And so, after lots of back and forth, we’re going to be the ones to take the first step here: a step in the direction the industry is headed, and has been headed for a while.
Today, we’re removing high leverage from FTX. The greatest allowable will be 20x.
— SBF (@SBF_Alameda) July 25, 2021
Bankman-Fried noted that high-leverage trades account for “far less” than 1% of the exchange’s trading volume. He said that the average leverage used by clients is around 2x.
“Although we think that many arguments against high leverage are wrong, we also do not regard it as an important element of the cryptocurrency ecosystem, and—in some cases—a healthy part of it,” wrote the head of FTX.
Bankman-Fried acknowledged that some users would like to have such an option, but this minority accounts for only a small share of activity on the platform.
Until today, FTX clients could trade with leverage of up to 101x.
Earlier, investor Michael Burry, who predicted the 2007 housing crisis, said that the problem of the digital asset market lies in excessive leverage.
“If you don’t know how large the leverage in cryptocurrencies is, you know nothing about cryptocurrencies,” he stressed.
Analysts at UBS say that the practice of using high leverage runs counter to the rules by which traditional markets are regulated.
In July, FTX said it had raised a record $900 million in funding for the industry. Investors valued the platform at $18 billion.
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