Cryptocurrency Markets and Extreme Leverage

View full article by Mark Hochstein

While cryptocurrency markets are still considered much more volatile in comparison to traditional stock and equity markets, changes in market wide leverage use may anticipate stability in the market.

Key points:

- Exchanges such as Binance and FTX previously allowed traders to enter 100x futures/perpetual contracts with as little as 1% down. Their policies regarding extreme leverage has changed amid growing regulatory concerns of the market.

- Binance and FTX now limit maximum leverage to 20x, other exchanges have begun to move in a similar direction.

-As a result the amount of leverage in the market is much lower than Q1/Q2 2021. The market run up from July lows to the current day has been significantly less volatile in comparison to the price fluctuations seen in February.