Popular cryptocurrency exchange Bitfinex is apparently going to extend its margin trading capabilities, according to the company’s chief technology officer, Paolo Ardoino. The new development will allow traders to use as much as 100x leverage.
Following In the Footsteps of BitMEX
Bitfinex, the popular cryptocurrency exchange which is also associated with stablecoin issuer Tether, will be adding expanded leverage trading capabilities to its platform.
According to CTO Paolo Ardoino, users will be able to use as much as 100x leverage, which is what BitMEX exchange traders can currently use.
— Paolo Ardoino (@paoloardoino) June 24, 2019
Up to now, Bitfinex has only allowed its users to post a margin of up to 3.3x, so the new implementation will be a substantial increase.
Ardoino also revealed some additional information on the matter, saying that the option will only be available for verified users. Additionally, only isolated margin trading will be allowed at the beginning, as this is “better for risk management.”
Isolated margin means that the liability of the trader is limited to the initial margin posted. In the case of a liquidation of one’s position, the trader’s available balance won’t be used to add margin to his or her position. This is a tool used to limit one’s losses to the initial margin which is set.
Such a framework is particularly appropriate for volatile markets such as cryptocurrency because a highly leveraged position can lose its equity very quickly.
We have yet to see when these changes will be implemented and what the additional conditions will be.
Is It Good or Bad?
Ardoino’s announcement immediately sparked discussion as to whether or not the change will be good for traders. While some have pointed out that 3.3x margin is already sufficient, Ardoino said that the new leverage capabilities will be entirely optional and up to each trader.
Margin trading comes with increased risk of losing one’s capital and should only be executed with well-informed and well-timed decisions. However, it can also be used as a means to extend one’s profits without having to deposit additional funds on one’s own.
In any case, there is obviously demand for this sort of thing, as numerous exchanges are moving to add margin trading. As CryptoPotato reported earlier this month, the world’s leading cryptocurrency exchange, Binance, also added margin trading capabilities on selected trading pairs.