The culprit behind Binance’s confrontation with FTX: leveraged tokens

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Binance announced delisting

The sky is gray and wild, and the exchange never closes. Although the market is still turbulent and leeks have withdrawn from the battlefield, the competition between exchanges is at the right time. OKCoin is happy to apply for a Japanese exchange license, Huobi China has launched a "blockchain + supply chain finance" industry solution, and Binance's tossing footsteps It never stopped either.

On the 31st, according to The Block, Binance plans to bid $400 million to acquire CMC; on the 30th, Binance Academy announced the establishment of a blockchain research institute in Shanghai. However, Binance, which continues to expand, also breaks down sometimes. On March 28, Binance announced that it would delist all FTX leveraged tokens. And at 18:00 (Hong Kong time) on March 31, 2020, it will be officially removed from the shelves.

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Changpeng Zhao's user first

As soon as the news of the delisting of all FTX leveraged tokens came out, Binance CEO Changpeng Zhao quickly posted 3 tweets explaining the reason for doing so. Changpeng Zhao said:

Increased market volatility following the sell-off earlier this month led to continued devaluation of leveraged tokens. But some Binance users continued to hold leveraged tokens because their positions were not liquidated. As the market fluctuates up and down, leveraged tokens will depreciate over time and are not recommended for long-term holding. If the user wants to recover the unrealized loss, it is unlikely to hold it and wait for it to rise back.

The main reason for the delisting is that we found that many users do not understand FTX leveraged tokens. Even if a window pops up every time to warn users of risk information, people still don't read it. FTX leveraged tokens are among the most active tokens, and delisting them is definitely not an easy choice. But protecting users comes first.

Judging by the earlier reviews, people still have some complaints. If you don't like our decision to delist leveraged tokens, please take a look at the price of these tokens in a month and let us know if you still complain.

FTX founder Sam Bankman-Fried also reacted quickly, tweeting:

1) Binance is not responsible for providing user training/support; 2) At the same time, as compensation to users, FTX will launch leveraged token trading pairs denominated in USDT; 3) Users can transfer leveraged tokens to FTX’s wallet for trading , or convert it to BUSD on Binance.

On Twitter, it is more subtle. On Telegram, FTX founder Sam Bankman-Fried said bluntly: "FTX has added USDT trading pairs, so users can deposit or trade leveraged tokens on the FTX platform just like Binance."

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The culprit who fell in love and killed each other

What Exactly Are FTX Leveraged Tokens? Let’s start with the FTX exchange. FTX was founded in early 2019 and has been in operation for about 9 months. It is a digital currency derivatives exchange that provides services such as contracts, leveraged tokens, and OTC. So far, not only has it received investment from Binance, but recently FTX has raised 15 million to 30 million US dollars at a valuation of 1 billion US dollars. It can be said that it is a derivatives exchange that takes off.

The biggest innovation of FTX, which is developing so fast, is its leveraged tokens. So what exactly is FTX leveraged tokens? According to the official introduction of FTX COO Constance, FTX leveraged token is a tool created to meet the needs of some trading strategies. It will track the performance of the underlying digital currency and generate a 3-fold return.

For example, ETHBULL (3 times long ETH) On the contrary, ETHBEAR is 3 times short ETH. Leveraged tokens can achieve 3 times the return of the underlying assets within a day. Users do not need to pay any margin when trading leveraged tokens, and can achieve the purpose of trading leverage by simply buying and selling coins. A simple understanding is to leverage long-short funds of a certain currency. At the same time, this fund has one of the biggest characteristics - never liquidate.

After the launch of FTX leveraged tokens, the slogan of never liquidation also attracted countless attention for a while. Some users said: This is awesome. Since there is no risk of liquidation, what are you afraid of! 3 times leverage is exactly what I need, so I don’t need to borrow money to increase my position.

Compared with likes, some users expressed concerns about this product in practice. Brother Zhuzi from the Bikan community said: After looking at the official website, it seems to be a simple and rude one-way leverage contract. Compared with traditional leverage, there is no liquidation problem, which is very good, but I have not seen how the funding rate is calculated.

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encrypted voice

The encryption community had a heated discussion on Binance’s delisting of FTX. Some people did not believe the reasons given by Binance. They believed that Binance did not want to educate the market.

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The Future of Leveraged Tokens

In fact, starting from 2019, digital asset derivatives such as futures, options, leveraged trading, etc., are growing at an exponential rate. In the future, derivatives are likely to replace spot and become the mainstream trend. Regarding the future of leveraged tokens, some people may be worried. Binance has a considerable trading volume of leveraged tokens. If Binance delists FTX leveraged tokens, where will the leveraged tokens come from?

Since the rise of leveraged tokens at the end of 2019, the first wave of delisting from Binance has retreated. But no one expected that the second wave would come so quickly. As the saying goes, A is honey, and B is arsenic. Just as Binance announced its delisting, MXC and BitMAX have already started setting off firecrackers.

The reality is so real. Leveraged tokens not only bring freshness to the derivatives industry, but also have unknown risks. In 2020, please give leveraged tokens more time to prove themselves.

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