There is a trend emerging in the bitcoin trading landscape. The trend is towards higher and higher leveraged products. If you do not have leverage or zero trade fees at your exchange, then you can expect to see tumbleweed go by every day. Give the users leverage or zero fees, otherwise expect exchange death.
Stigma – Socialised Losses and high leverage
There is a chance of Socialized losses when trading at some futures platforms with high leverage. When there are a lot of liquidated positions, the system can be at a loss. To prevent the system from losing money everybody that made a profit after the futures have settled pays a part of their profit into the pot to pay for the liquidations. In the past, there were significant socialized losses at okcoin and bitvc. In more recent times since adjusting some of the parameters around liquidations and increasing the insurance fund size socialized losses occur a lot less. Socialized losses were something that a lot of exchanges did not want to be associated with. High leverage futures were thought to be unsafe and not a real derivative. These two factors made some platforms hesitate to make the move to high leverage products.
At the start of 2015 Crypto Facilities offered 3:1 which they later rasied to 5:1. Now have a turbo product with 50:1 leverage. That is quite an increase in leverage wouldn’t you say? At Inside Bitcoins Berlin,Dr. Timo Schlaefer the CEO characterised anything over 3:1 to be “unsafe” and a “gambling product. Oh, how the times change. Compared to a lot of other platforms that offer 20-100:1 leverage. One thing that is different about the products at Crypto Facilities is that there are not any socialised losses. The futures are settled without a possible clawback if there are too many people on the losing side. Even at 100x leverage CF does not have socialised losses. They are also regulated by the FRN. Recently they have made a partnership with CME to create a bitcoin reference rate and real-time index.
Bitmex started out as a futures platform designed for institutional traders. It was confusing and overly complicated for a lot of traders and struggled to get volume. Little by little the UI improved, products were taken away and new ones were added. With the new products and higher leverage came new traders. The latest product is a 100:1 perpetual swap that allows people to trade bitcoin at 100:1 without having to deal with futures settlement. The only one of its kind on the market. Bitmex has also added a perpetual swap at 33.1:1 and has the “regular” futures for bitcoin, litecoin, factom and the A50. Unlike an altcoin exchange, everything at bitmex is based on bitcoin all futures and swaps are denominated in bitcoin. This allows you to get exposure to different markets using bitcoin.
Known for ghash it’s mining pool CEX has been a quiet place in regards to trading as of late. It turns out they have been doing a significant amount of business with people buying bitcoin via credit card and have reportedly had40 Million in deposits and are adding margin trading. They have lowered the fees on all trading pairs and are offering no fees for trading on the pairs ETH/BTC and LTC/BTC. Without fees day trading and trading with a trade bot more viable since you are only paying the spread. Even without fees any exchange will have a tough time getting anywhere near the volume at okcoin.cn. There are no trade fees and the volume is off the chart. Not only is okcoin.cn without fees but they also offer 3:1 leveage. Is the volume at zero fee exchanges real or simple wash trades to pump up the volume? You will have to decide for yourself.
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