Binancians have been pushing the world largest crypto exchange by volumes for margin trading services. Now, Binance has heeded to their call. The crypto exchange has announced that they have launched their Margin Trading platform for all their eligible users. The news has been received with mixed feelings with most crypto Reddit users sounding an alarm over the new service.
One Reddit user, for instance, wrote:
“Margin trading is gambling for suckers. 90% of all traders lose money. It’s pretty much impossible to be profitable unless you’re already some high-level trader”.
Another Reddit user goes ahead and asks for a moment of silence “for all of the sheep about to be slaughtered.”
One more writes that they cannot wait for a ‘BinanMeRekt’ bot same as the bitmexrekt bot the BitMex liquidation bot that immortalizes those that have blown their margins.
Margin Trading Is a Wrecking Ball
Regular margin trading has always been a difficult way to make money. Data shows that 96 percent of all traders-irrespective of asset class traded- lose their cash and quit. Margin trading allows aspiring traders to borrow funds from a broker so that they can take more significant positions in trades.
This can amplify either consequent gains or losses. Margin trading is therefore different from gambling but quite as risky. While gambling is a game of chance, Margin trading is speculative. Speculative trading is done through calculated risks, where a positive return on investment is expected.
High Volatility Makes Margin Trading Very Risky
Margin trading using crypto is nevertheless riskier than speculative Forex trading. Fiat is volatile, an aspect that plays well with margin trading. A spike in currency values over short periods could bring in profits for the trader. Cryptocurrencies, however, are even more volatile by nature, which can be good or very bad depending on the speculative prowess of a trader.
The Binance co-founder Yi He said:
“Though the current cryptocurrency market and legacy platforms for margin trading pose greater risks and benefits at the same time, we are confident that its development coupled with more knowledge on proper risk management will help realize greater benefits in the long run.”
Binance’s 3X Leverage
Consequently, the Binance Margin Trading platform is available in pairs that include XRP, BTC, ETH, TRX, BNB, and USDT. All coins listed on Binance will eventually fund it. The trades will attract a 0.02 percent fee for all pairs, though the BNB pair will carry a lower 0.01 percent charge.
Binance also says that its version 2.0 platform with margin trading capabilities has a newly optimized interface. Additionally, it has an advanced engine that improves order matching. Users will find it much easier to move funds from the margin wallets, into the main Binance Wallet. This process will not cost the trader any transaction fees.
BitMEX has a margin platform service that gives 100x leverage on BTC derivatives. Regulators around the world have given retail cryptocurrency derivative products a cold reception. The UK Financial Conduct Authority is considering a ban on the products, which would kill crypto margin trading for British investors. Regulators have cited high losses accrued from high leveraging as good reasons for the ban.