The world’s leading cryptocurrency exchange, Binance announced Thursday, the launch of its new exchange feature known as “Margin Trading Service.”
The Binance margin trading service will allow trading with borrowed money on the exchange which yields higher profit potential, however with greater risk.
The implementation of margin trading on Binance was first rumored in March when the exchange made alterations to the original public Application Programming Interface (API) response contained in their official GitHub documentation.
During the launching, Binance CEO, Changpeng Zhao noted that the development is another step to provide an inclusive cryptocurrency trading platform, that will meet the needs of both advanced institutional traders and retail traders on the Binance platform.
“We are providing a new tool in the financial services and cryptocurrency markets to help amplify trading results of successful trades,” he added.
The exchange further noted that the amount of funds a user can borrow is determined by the margin wallet balance, following a fixed rate of 3.1 (3x). Therefore, users can acquire two more Bitcoin (BTC), if they have 1BTC already in the wallet.
Additionally, Binance margin trading can be used to improve order matching on the crypto product and also to open both long and short positions. The long position usually indicates that the price of the given asset will go up, unlike a short position, which means a reduction in the amount of the asset.
Meanwhile, Changpeng Zhao already issued an important reminder for prospective margin traders, saying that,
“Margin Trading confers a higher profit potential than traditional trading, but also greater risks. Please be aware that in the case of extreme market volatility, there is even a risk that your assets may be liquidated.”
As per the report, the service comes with a know-your-customer (KYC) ID and two-factor authentication as security measures. Hence, traders are required to own such ID to utilize margin trading on Binance.