What Happened: Major crypto exchanges Binance and FTX moved to abandon the high levels of leverage trading offered on their platforms.
In a series of tweets on Sunday, FTX CEO Sam Bankman-Fried announced that it was time to move on from leverage trading.
“Today, we’re removing high leverage from FTX. The greatest allowable will be 20x,” said Bankman-Fried.
The FTX CEO explained that the move came after “lots of back and forth”, but it would be the first derivatives exchange to take the first step towards the direction the crypto industry is headed.
Not long after FTX’s announcement, Binance’s CEO Changpeng Zhao declared that Binance too would be limiting the maximum amount of leverage allowed on its platform.
.@binance futures started limiting new users to max 20x leverage last Monday, Jul 19th, 7 days ago. (We didn’t want to make this a thingy).
In the interest of Consumer Protection, we will apply this to existing users progressively over the next few weeks.
Stay #SAFU. ?
— CZ ? Binance (@cz_binance) July 26, 2021
Binance reportedly began limiting new users to 20x leverage on July 19, without disclosing any official announcements at the time.
“We didn’t want to make this a thingy,” said Zhao in his Twitter announcement earlier today, while confirming that the changes to leverage limits will be applied to existing users over the next few weeks.
Read also: Decentralized Exchange Uniswap Faces Community Backlash After Delisting 100 Tokens
Until today, both Binance and FTX offered 100x leverage to crypto derivatives traders, making the newly imposed limits a drastic change for some market participants.
However, with regulators turning up the heat on crypto exchanges and the massive liquidation risks imposed by the high levels of leverage, many viewed the move as a step in the right direction.
Price Action: At press time, Bitcoin (CRYPTO: BTC) was trading at $37,337 after gaining more than 5.39% overnight.
The leading digital asset reclaimed the 50-day moving average after adding $4,400 to its price over the past 24-hours.