Binance Performs Final Test Before Launching Margin Trading
Allowing leverage would increase risk, but also boost upside potential, and add to the influence of Binance.
Binance is rolling out a final test for margin trading, limiting the service to another 1,000 traders. The leading exchange, which has carved out a larger percentage of market influence over the past months, intends on offering margin trading soon.
Margin trading uses leverage to take up positions, leading to higher potential gains, but also increased risk. Binance has stated that only sufficiently liquid markets would see margin trading added. Illiquid coins are at extreme risk for deep losses, as in the recent case of Clams (CLAM), a project that caused $13 million in margin call losses on Poloniex.
Following the news of the potential for margin trading getting closer, Binance Coin (BNB) rose to more robust price levels. BNB traded at $31.82, recouping some of the losses of the past days.
Margin trading has been unrolled in stages and has a small invite-only market for a handful of coins. The market includes Bitcoin (BTC), as well as BNB, TRON (TRX), Ethereum (ETH), and Ripple’s XRP. Margin trading has been very limited, by invitation only, and has excluded some regions based on Binance’s policy. There is no set deadline for allowing margin trading for all users and for additional assets.
With this move, Binance will enter the margin trading competition, where BitMex is still a leader. The newly created BitKing exchange will also aim to offer high-leverage margin trading, an even risker proposition. The addition of margin options will be a part of the Binance 2.0 upgrade, announced earlier.
Binance has made other steps forward in the past week, including the addition of Binance DEX to the Trust wallet. The decentralized exchange is growing its volumes, now exceeding $2.5 million’s equivalent in 24 hours. Trading activity has also changed and is no longer concentrated on the Harmony (ONE) token, but distributed among a handful of assets.