On October 18, 2019, an official announcement reports that Binance Futures has increased the platform’s maximum trading leverage to 125x for BTC/USDT contracts and enabled a leverage adjustment function on its web and Testnet trading interface.
Users will now be able to select any leverage between 1x and 125x when trading live, depending on the level of risk they are willing to take. A pop-up future enables traders to note the maximum position that the user can trade-in with the current level of leverage.
Commenting on the launch, Binance CEO Changpeng Zhao stated, “We have seen an increase in institutional participation in trading, and they are flocking to Binance Futures. The market has been demanding a product with superior stability and performance; now, we are providing one.”
This announcement comes just five weeks after Binance Futures officially launched on September 13, during which 20x leverage was the only possible way to trade BTC/USDT contracts.
What is Trading Leverage?
Trading leverage refers to using borrowed coins to “lever” up trade by opening a more significant position with a smaller amount of the trader’s funds. For instance, instead of putting up the full market value of a coin such as Bitcoin, a cryptocurrency trader may decide to operate on ‘margin’ -25:1 leverage (or 25x).
This provision means that for every dollar the trader stakes in equity, they can trade up to $25. While leverage trading can be a powerful trading tool boosting buying power, allowing for diversification and overly enhancing returns, it comes with enormous risks.
Trading leverage can magnify the potential loss of a trade resulting in even higher losses. Think of this situation, a trader who bought Bitcoin worth $18k on a credit card using 100x leverage, and Bitcoin’s price fell to $6k. The trader will have to deal with an enormous loss and will even resort to selling his house and car to recover the loss.
The Risk in Trading Binance Futures
During the launch of the 125x cryptocurrency trading leverage, Binance Futures CEO, Changpeng Zhao warned the users of the risk involved in trading leverages. Changpeng implored traders to trade with caution as such a trade attracts a high level of risk. He stressed that the new trading future is not ideal for new traders, but experienced traders with an appetite for risk.
The launch of 125x trading leverage puts Binance ahead of rival cryptocurrency exchange BitMEX in terms of providing the highest leverage position for digital asset futures contracts. Currently, BitMEX offers 100x trading leverage for a number of its future cryptocurrency contracts.