Recently, there has been ongoing discussions regarding how most exchanges grant extremely high leverage. This high leverage sometimes gets traders liquidated.
He explained that the reason behind this is the company’s goal of enhancing responsible trading among its users. Moreover, they “don’t think high leverage is an important part of the ecosystem” and it can even be unhealthy.
Foremost, Sam cleared that liquidations don’t chiefly contribute to volatility as some might have asserted. While tweeting about how exchanges are making off from liquidations, he went further to say that “liquidations are way less than 1% of our volume and positions. It’s not a significant part of the exchange.”
“Any margin system needs to have liquidations as a backup, but the goal is to do so rarely. At FTX, way less than a percent of volume comes from margin calls. This contrasts with a few platforms which are sometimes > 5%, and some which removed data because it looked bad,” he remarked.
In replacement for this, Sam announced that there would be new features on FTX and users should anticipate them.
From a regulatory standpoint, some analysts have enthused that this would sit well with a lot of regulators as they have been canvassing that exchanges lower their leverage limits.
This announcement has generated a lot of comments. Some users opined that it is an abrupt limitation to how far they can leverage with their funds. On the other hand, some users saw it as a way to kickstart responsible trading.