Two major cryptocurrency trading platforms Binance Futures and FTX disclosed on Monday that they both have made a remarkable decision related to the crypto trading on their platform. Both the trading platforms have disclosed that they have decided to reduce the maximum leverage that their users can trade with.
Binance and FTX have made a drastic cut of 80X as the firm has earlier allowed leverage above 100x on certain trading instruments, are now reducing their maximum allowed leverage to 20x. For the understanding of the readers, Leverage implies the ratio between the capital committed as margin and the size of the position. If we look at the example, using 0.1 BTC as margin enables a trader to enter a position worth 1 BTC if using 10x leverage.
Furthermore, the firms have disclosed the reason for the cut on the leverage limit. Binance and FTX disclosed that the reason which compelled them to cut down their leverage trading offerings is to enhance their relationships with regulators. This could be particularly pertinent for Binance as Binance has faced various warnings from regulators across the globe in recent weeks. This includes regulators from the UK, Italy, Japan, Thailand, and the Cayman Islands.
Additionally, Binance CEO Changpeng “CZ” Zhao disclosed previously earlier than Binance Futures will enforce a 20x maximum leverage limit to all users in the coming weeks. About a week ago, Binance Futures already commencing limiting leverage to 20x for new users. Binance Futures presented leverage of up to 125x on its BTCUSDT perpetual contract.