Binance, one of the largest crypto exchanges in the world, appears to be getting ready to add margin trading to its extensive list of trading options. On Tuesday, Binance posted a cryptic image that simply displayed the numbers “2.0” on its Twitter feed. This was most likely a hint that version 2.0 of Binance is on its way, and one feature that is expected in the upgrade is margin trading. This addition will introduce a new type of crypto investment opportunity for users of the popular exchange.
Margin trading essentially involves using borrowed funds to make a trade. This strategy offers investors much more leverage than usual, which means that margin trading can be used to achieve greater profits. Margin trading is also a very high-risk activity, and due to the regulations that surround it, it isn’t offered by the vast majority of crypto exchanges. However, if Binance’s plans are any indication, crypto margin trading is quickly growing in popularity and becoming more viable.
Margin Trading So Far
Rumors of Binance’s foray into margin trading began to circulate in March, but those rumors remained unconfirmed for several weeks. Then, in early May, Binance CEO Changpeng Zhao confirmed that margin trading was indeed on the way. Plus, a deep dive into Binance’s trading API revealed information related to the exchange’s plans. That information indicated which margin trading pairs Binance plans to offer, and it also seems to show that margin trading is already partially enabled.
Binance will not be the first exchange to introduce margin trading. Other major exchanges, including Kraken, Bitfinex, and BitMEX also offer margin trading alongside their other crypto investment options. Meanwhile, some trading platforms have explicitly opted out of this style of trading. Bakkt, which is a highly anticipated crypto trading platform, revealed last August that it will not offer margin trading among its services, as its goal is to offer trading options that are backed by real assets.
Impact on the Market
The hype that is building up around margin trading is a very good sign for Binance. It is an indication that the exchange can thrive in the aftermath of this month’s $40 million attack. Public perception of the exchange has remained positive, and Tuesday’s “2.0” teaser caused the price of Binance Coin (BNB) to surge by about 10% within 24 hours. Additionally, the eventual effects of margin trading might not be limited to Binance: they could plausibly benefit the entire crypto market and promote investment.
Heightened demand for margin trading, combined with the fact that Binance moves an incredibly large amount of crypto, means that the market could see a noticeable influx of investments when Binance launches the feature. To cynics, increased investment could be a sign that savvy investors are attempting to profit by propping up poorly-grounded trading opportunities. But to optimists, greater investment could be a sign that crypto still has what it takes to attract new investors.