BTCC, formerly BTC China, has launched a new platform for the spot trading of bitcoin, offering up to 20x leverage. BTCC CEO Bobby Lee announced the news at Money20/20 in Las Vegas.
BTCC has been traditionally known as one of China’s ‘big 3’ bitcoin exchanges, the other two being Huobi and OKCoin. They account for a combined 86% of global bitcoin trading volume, according to data from bitcoinity.org.
Bitcoin is once again grabbing the attention of traders after its latest run pushed it above $300 on several exchanges. Traders hungry to amplify anticipated profits may therefore be wooed by those offering the greatest leverage. In addition, bitcoin’s run has been impressive but stable. The reduced volatility limits potential short-term gains, and therefore, higher leverage is needed to compensate.
BTCC said the 20x leverage is the highest in the industry. In an interview with Finance Magnates in June, Jesse Powell, CEO of the Kraken crypto exchange, indicated that his exchange may increase its leverage to 10-20x in the future, and that bitcoin’s newfound stability helped motivate the decision to introduce margin in the first place.
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Bitcoin CFD’s, which allow traders to gain exposure to the underlying asset without actually holding it, have long offered 20x leverage. However, they are also structured differently, as bid/ask spreads are much wider than in spot trading, the contracts have expiries and fees are charged on positions nightly.
With either product, traders and brokers are exposing themselves to greater risk with the higher leverage. Lulled into bitcoin’s calmer trading profile, traders are tempted to take on greater margin, which can backfire badly if volatility unexpectedly resurfaces.
China’s bitcoin traders are believed to have contributed significantly to bitcoin’s 1,000% spike in October-November 2013, and the hype surrounding the bubble that burst following restrictions by the People’s Bank of China (PBOC).
Pro Exchange comes in addition to BTCC’s existing spot exchange. The company also runs a mining pool and wallet service.