Critics of cryptocurrency derivatives do not understand how important these financial instruments are in increasing the liquidity and efficiency of digital asset markets. The head of the FTX platform, Sam Bankman-Fried, said this in an interview.
“This is a somewhat misunderstood area. Many people notice that the trading volume of the crypto derivatives market is higher than the spot one, and this is true. But this is true for every asset class in the world. The reason is that derivatives are slightly more efficient if you don't need immediate delivery. I think this adds liquidity to the markets and makes them more efficient overall,” he explained.
Bankman-Fried also noted that derivatives offer investors high flexibility as they do not burden them with the challenges of holding digital assets.
He admitted that in some periods the effectiveness of derivatives is indeed questionable. In particular, during liquidations, when the market plays against the holders of margin positions.
In July, FTX lowered the maximum leverage for its clients to 20x. Then Bankman-Freed explained this decision by the lack of demand for high leverage among traders.
Trending: Salvadorans are against buying bitcoins at the expense of the budget
“Initially, we did not have this feature, but it was in high demand. The users were reluctant to use the platform unless we add that capability,” he mentioned.
Bankman-Fried emphasized that high-margin trading is not unique to cryptocurrency exchanges. He noted that “there are many places” that offer over 100x leverage on stocks.
“This high leverage trading is not something that I thought was particularly important or beneficial for a healthy cryptocurrency market. I do not think that regulators will be delighted with such practices, and it seemed to me the right thing to remove it,"- explained the head of FTX.
Talking about the further development of its exchange, Bankman-Fried noted that its strategy consists of several parts. FTX is considering acquiring "applications that would build a large loyal user base."
Trending: CoinShares: Bitcoin funds raised $8.8 million in a week
The company does not exclude the acquisition of some competing platforms, as well as the purchase of firms licensed in interesting FTX jurisdictions.
According to Bankman-Fried, FTX is not going to go public shortly. However, a company can take such a step if it is "useful for the business."