FTX Exchange Limits High-Leverage Crypto Trading

July 29, 2021 at 01:41 AM GST 2 mins read News

FTX Exchange limits leveraged crypto margin trading by over 80x.
FTX CEO and billionaire Sam Bankman-Fried shared the news on Twitter.
Also, FTX is the latest in a growing number of exchanges to limit leverage trading.

FTX Exchange is the latest big crypto exchange to limit risky high leverage trading. The decision means that investors will no longer be able to use huge debt amounts when trading on the exchange.

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FTX’s billionaire CEO, Sam Bankman-Fried (SBF), shared the news on Twitter. In the tweet thread, SBF shared that FTX will limit margin trading to 20 times the invested capital.

7) For us, like liquidations, it's way less than 1% of our volume and positions. It's not a significant part of the exchange.

It's also not what chiefly contributes to volatility. Liquidations do, one some exchanges (although generally not so much FTX!). But > 20x is small.
— SBF (@SBF_FTX) July 25, 2021

The change takes the margin cap over 80 times lower than its previous cap of 101x. SBF went on to attribute the decision to growing crypto market volatility and scrutiny. Of note, the crypto market crashed in May leading top crypto bitcoin to fall over 50% from its April all-time high of $64,863.10. As such, FTX hopes the decision will “encourage responsible trading.”

The news comes in the wake of the exchange receiving a huge funding influx recently. Of note, FTX recently raised $900 million in a recent funding round. At the time the exchange was valued at $18 billion with over 15x growth in the past year.

In addition, SBF noted that the new restrictions would not affect FTX trading volumes. The CEO also disclosed that the average leverage used on FTX is only 2x.

Notably, the exchange recorded a 24-hour trading volume of $2,398,327,979. Also, the trading volume was up 174.07%, at the time of writing. As such, FTX is currently the 6th ranking crypto trading exchange by trading volume according to Coinmarketcap.

Also, FTX follows other top crypto exchanges like Huobi Global which dropped its leverage from 125x to just 5x last month. Similarly, Coinbase Pro stopped margin trading last November.

At the same time, top global crypto exchange, Binance, has been flagged for regulatory issues in several countries. Some regulators have even accused Binance exchange of performing regulated services without proper licensing and documentation.

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