Bitcoin exchange Bitfinex announced that effective Monday, it will be updating and streamlining its margin rules.
Bitfinex is one of the few exchanges allowing traders to trade bitcoins on margin.
They will be scrapping the “choose your leverage” feature, which previously offered a choice of 1:1, 2:1 and 2.5:1. The vast majority of traders chose the maximum value. Instead, a fixed maximum margin will be assigned to each product based on its volatility.
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The “Tradeable Balance” will now account for all collateral indicated within a given pair (e.g. BTC/USD will account for USD balances as well, not just BTC). Traders had previously achieved 3.5:1 leverage when using BTC as collateral on a long BTC/USD swap. This will harmonize risk management.
As traders may be disappointed by the effective margin reduction, initial leverage will be increased to 3.33:1.
The company will also be doing away with the “leverage” terminology, instead referencing “initial margin” and “maintenance margin”, terms more commonly used in the trading industry. And instead of a ratio (x:1), a percentage will be expressed to represent the amount of equity needed relative to total positions. Initial margins are thus 30%, maintenance margins are 15%.
The new structure will simplify its adaptation to new product offerings in the future.