Major crypto exchange FTX cut its allowed leverage, making it 20X from 100X.
Related: Crypto Exchange FTX Attracted $900 M in Series B
By doing so, the company aims to reduce risks connected to trading.Through leverage, traders borrow funds to boost their position and receive income. So, for example, 100X leverage will raise a $500 BTC position to be as large and beneficial as a $50,000 BTC position.
FTX CEO Sam Bankman-Fried (SBF) posted a series of tweets on July 25, expressing his thoughts on margin trading, high leverage, and FTX's approach.
SBF emphasized that an effective margin system is a part of an efficient economic system. However, like other things, it has limits too. FTX CEO says the platform's aim is to attract sophisticated users and promote reasonable trading.
4) (https://t.co/GpSNTsvMpg for data)
— SBF (@SBF_Alameda) July 25, 2021
This is partially because we try to encourage responsible trading.
Our product and margin system also tend to attract sophisticated users.
As tweeted by Bankman-Fried, margin trading is a small fraction of the exchange’s activity. In his opinion, high leverage isn't an essential part of crypto, and sometimes, it isn’t a healthy part of it.
FTX was founded by Bankman-Fried in 2017. Currently, the platform is among the leading crypto exchanges and 29-year-old SBF is one of the youngest crypto billionaires.