A trend has started developing in the altcoin market where a project’s good performance and pump in its value attracts seemingly unwanted attention from some of the top exchanges. Recently, a number of coins that have shown big growth have been added to the Futures trading stable of the likes of Binance and OKEx only to see the bears come rushing in and short the market with massive leverage.
Allowing futures trading on some of these smaller altcoins that have built up their market with successful work on the projects exposes them to the cutthroat world of futures trading. When these coins are opened up to a platform that allows for futures trading, especially with high leverage, there is a chance for traders to come in and set up huge shorts.
The projects are often rising in price off of the work they have done, but the true snowball effect comes in as the speculators get wind of the coin and start pumping up its market. Because a lot of the growth that gets it to an improved market share is speculative, it is very susceptible to a fall — especially if people are betting on it.
One prime example of this is THETA, a project that grew from $0.08 to $0.46 in a matter of a month, catching the attention of Binance, which then announced perpetual contracts with leverage of up to 50x.
Following this launch, the price of THETA plummeted as the chance to short the market was now available and seemingly many traders took this chance with high leverage to make maximum profit.
Two new coins have today been launched for futures contracts on major exchanges, Kyber Network and Ziliqa on OKEx and Binance respectively and it appears that many in the community are already aware what this could mean for the price of these projects.
This pattern that is emerging has become an interesting one to watch as more and more altcoins get the opportunity to be traded with futures contracts by some of the world’s largest exchanges.
Binance, as an example, have been on a mission to list a number of different coins for futures trading in the last few months. This in itself has not come without controversy as when they launched the XRP option, there were allegations of insider trading.
But, in this instance with one of the top three coins by market cap, the news actually made XRP’s price rise. In comparison with these smaller tokens, where it opens an opportunity for Bears to short.
Binance began this journey by saying it would be looking at mostly the top 20 coins, but the pattern now looks to be that if a project rallies significantly, it gets launched for sutures trading and thrown to a potential bear den.
Concerns from the community
The ability to open up short contracts with 50x leverage on tokens that are rather small and not as well established markets has not escaped people’s concerns as many people on twitter have responded to today’s launch of Ziliqa on Binance.
However, there are some that are happy to play the opportunity as it stands and know that there will be a huge short on the market coming when it opens up, and are willing to take advantage of it.
Of course, it is unlikely that this is a ploy by the exchanges to either damage the market of a coin that it launches futures for, or to set up some sort of market manipulation. Rather, their decision to allow futures trading on a number of different projects means that different opportunities will crop up.
How much this affects the project’s market is another thing, and it would be interesting to know if these additions onto futures trading are well received, or dreaded, by the platforms.