Binance, one of the largest crypto assets exchange companies, has announced its plans to cut margin trading leverage limit to 20x. The announcement came just a day after FTX, its competitor, announced the same.
Changpeng Zhao, founder and chief executive of Binance, tweeted that the company is lowering the leverage limit from 100x and 20x. The conditions were applied to new users from July 19 and will gradually expand to all its user base.
Founder and CEO of FTX, Sam Bankman-Fried also announced the new rule in a series of tweets introducing the new limit. Many are speculating that the move came from companies in hopes to avoid conflicts with the authorities in the future. A recent New York Times article also heavily condemned the use of leverage trading citing it as risky. According to the article, Zhao acknowledged that leverage does play a part in volatility.
While Bankman-Fried explained that leverage trading is not a big part of its trading volume, hence not a big contribution to market volatility, he believed it’s not a healthy part of the crypto ecosystem.