Cole Petersen · 10 hours ago · 2 min read · Insights via Alex Krüger
News › Bitfinex › Derivatives
Bitfinex is adding 100x margin trading to its crypto derivatives platform
1:100 leverage on Bitfinex
In a recent tweet, the chief technology officer at Bitfinex, Paolo Ardonio, hinted that the platform will soon allow its users to trade 1:100 leverage.
— Paolo Ardoino (@paoloardoino) June 24, 2019
Bitfinex will continue to offer up to 3.3x margin trading, but as an optional instrument, it plans to extend its margin trading capacity for its upcoming expansion into derivatives trading.
Ardonio explained that over the years the company has collected data from its customers’ margin trading behavior, which allowed him to have a better understanding of the position sizing requirements needed to protect customers’ capital.
As a result, the cryptocurrency exchange will only offer the 100x leverage feature to verified users on isolated margin positions, helping traders manage risk and avoid having their positions closed or liquidated.
Since the cryptocurrency market is extremely volatile, high leverage positions can lead to astronomical gains and rapid losses. Thus, allowing traders to have isolated margin—which is the initial liability added to an open position—helps them control how much capital is at risk so that in the event of a liquidation, the available balance on their accounts will not be added to the margin position.
The liquidation engine
At the moment, BitMEX is the only cryptocurrency exchange that offers 100x leverage derivatives trading, and it is notorious for the number of traders who have lost all of their capital through careless use of leverage. Even though many traders have been able to profit from this feature in this exchange, it comes with high risks that could lead to complete capital loss.
Larry Cermak, director of research at The Block Crypto, recently pointed out that the BitMEX index can be easily manipulated to liquidate thousands of transactions on the platform.
What do you think can be done with people manipulating BitMEX’s index to liquidate millions? Unless BitMEX introduces better measures, this will continue happening and people will continue getting REKT
— Larry Cermak (@lawmaster) June 6, 2019
This same process was examined and explained over a year ago on Reddit.
It remains to be seen whether Bitfinex will actually protect its customers from overleveraging, but considering the profits to be made it seems unlikely.