Cryptocurrency exchange Bitfinex revealed it wants to offer derivatives products with up to 100x leverage for cryptocurrency traders.
Hedging On Cryptocurrency Derivatives
Chief Technology Officer Paolo Ardoino told The Block on June 25 that the cryptocurrency exchange was ready to ship a 100x leverage product for certain users. According to the post, the project has been under development for some time and is “now ready for prime time.”
The product was referenced in last month’s whitepaper published by Bitfinex for its $1 billion private token sale of LEO, stating
“Qualified Bitfinex account holders will be able to trade a new hedging product through a derivatives wallet.”
The whitepaper originally claimed that the new hedging mechanism would be released by the end of June, a timetable that fits with Ardoino’s “ready for prime time” statement.
Ardoino confirmed that only “verified” customers will be allowed access to the product, given the risks involved in such highly leveraged trades.
The CTO also took to Twitter to quell user concerns over Bitfinex’s existing 3.3x margin trading. Ardoino explained 100x leverage will be “optional,” and that their current leveraged trading products will be unaffected by the release.
It will be an optional instrument, no change to our current margin offering.— Paolo Ardoino (@paoloardoino) June 24, 2019
Big Risk, Big Reward
Bitfinex is looking to compete with rival exchange BitMEX, who already offers 100x leverage through its bitcoin perpetual swap contract. However, Bitfinex claims its product is designed as a legitimate hedging tool for clients, rather than a gambling mechanism.
Max Boonen, CEO of trading firm B2C2, believes the product will only appeal to retail hedgers, as large investors will shy away from the risks involved in 100x trading.
According to Boonen,
“There’s nothing wrong inherently about 100x. But as a commercial hedger you want lower leverage margin. The larger investor wouldn’t want to take the risk of 100X, typically. They don’t want to go balls to the wall.”
The cryptocurrency derivatives market has been heating up. Last week bitcoin-bull Mike Novogratz’s Galaxy Digital announced plans to offer cryptocurrency options contracts.
Binance has also reportedly been exploring futures trading. On June 24, Binance CEO Changpeng Zhao tweeted the exchange had executed its first margin liquidation for a BTC short.
We had our first Margin liquidation today. Guess what, it was on a #BTC short.— CZ Binance (@cz_binance) June 24, 2019
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