Crypto-exchange FTX has reduced its maximum leverage

July 26, 2021

Crypto-exchange FTX has reduced

Crypto derivatives exchange FTX has reduced the maximum leverage for its clients, limiting it to 20x. According to platform founder Sam Bankman-Fried, the reason was a lack of demand for high leverage among traders.

8) The average leverage used on FTX is ~2x. And while we think that many of the arguments are high leverage miss the mark, we also don't think it's an important part of the crypto ecosystem, and in some cases it's not a healthy part of it.

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.

Bankman-Fried noted that high leverage trades account for "far less than" 1% of FTX exchange turnover. The average leverage used by clients is around 2x, he said.

    "While we think many of the arguments [against] high leverage are flawed, we also do not consider it an important element of the cryptocurrency ecosystem, or in some cases a healthy part of it," the FTX chief wrote.

Bankman-Fried acknowledged that some users would like to have this option, but that this minority is represented by a small portion of the activity on the platform.

Until now, FTX clients have been able to enter trades with up to 101x leverage.

Earlier, investor Michael Bury, who predicted the 2007 mortgage crisis, said that the problem with the digital asset market lay in too much leverage.

   "If you don't know how much leverage there is in cryptocurrencies, you don't know anything about cryptocurrencies," he stressed.

Analysts at Swiss financial holding company UBS believe the practice of high leverage is contrary to the rules under which traditional markets are regulated.

As a reminder, FTX announced on 20 July that it had raised an industry record $900m in funding. Investors valued the platform at $18bn.

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About the author

Hi there, my name is Zalman Weinberg. I'm enthusiast with over 7 years of experience in cryptocurrencies and blockchain. Professional Trader providing Blockchain solutions to Startups and Enterprises. Expert in all cryptocurrency exchange APIs (BitMEX, Bittrex, Binance, Bitfinex, Kraken, Poloniex, Gdax etc.). I have also worked with multiple Forex broker APIs.

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