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Margin Trading And Lending On The Crypto Market

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In recent years, many of you who are interested in crypto, probably have noticed the continuous growth of the number of new exchange products that help earn from lending and margin trade.

In case, there are unknown terms, a short note:

Margin trading is trade with the help of borrowed funds. Turning to the details,  when a trader takes out a loan on collateral and sell borrowed funds. After that, if the rate of sold coins is dropped, a trader buys borrowed funds with a lower rate and pay back the loan. The difference between the initial selling price and buying price is a profit or loss. Margin trading became highly popular among ordinal markets. Perhaps, many of you not only have heard but also have already tried to trade through Forex currency market brokers. However, it is a relatively new type of trade for the crypto market. 

Lending occurs when someone allows another person to borrow something, or, in our case, cryptocurrency. Therefore, repayment will include the payment of interest.

Leverage is the ratio of the trader’s funds (which are the guarantee for the loan) to the loan size. For instance, 2x leverage means that having $100, it is possible to borrow $200, while 10x leverage provides an opportunity to borrow up to $1000 with the initial balance of $100.

You’d think, the higher the leverage, the “better” for the traders, because more funds could be used to trade. You are likely to believe in such a golden opportunity that is created for the traders, but let’s go deeper into details.

If you have $100 and you have borrowed $200 (leverage is 2x), after that, you have bought 1 ETH expecting that an exchange rate of Ethereum will grow and you could sell 1 ETH for $250, pay back the loan of $200 and profit from the deal $50. But something went wrong and the ETH rate, instead of growing, began to fall. At the same time, you have $100 on the balance (as security for the loan) and also 1 ETH, the price of which falls. You also have a debt of $200 (for which you have already bought 1 ETH). In this case, the forced repayment of your loan and the liquidation of the trading position will happen at the price of Ethereum of $110, that is, you have about 45% in case of rate swings.

And now, you suppose, having $ 100, take about $ 1000 (leverage 10x) and buy 5 ETH, in this case, a drop in the price of Ethereum from $ 200 to about $ 185 will lead to the liquidation of your position and the use of collateral to cover the loan, you’ll practically “zeroing” your balance.

Now, you can easily imagine what kind of rate fluctuations with leverage of 20x-100x is certain to zero out your account. For example, with 20x it will be about 4% aren’t in your favor, and at 100x less than 1% of changes in the rate will already put a crimp on your balance.

Daily exchange rate fluctuations and short-term reversal in a currently downward trending price that can easily make up 10-15% even for the most liquid currencies like BTC and ETH should not be neglected. So, if everyone knows about the volatility of the cryptocurrency market, why are exchanges still offering to “trade” with leverage of 10-100x? 

Unfortunately, it is clear that the cryptocurrency market turns into one huge gambling house, and the larger players benefit from the “herd mentality”  of lemmings, promising them exorbitant profits, playing on excitement, or ignorance. If a few years ago, crypto exchanges offered only spot trading, now many of the “top exchanges” are ready to give leverage up to 10-150x.

The thing is, based on the simplest mathematical model, currently, if a trader deal with leverage of 10x-150x in the crypto market, the probability of losing all funds is tending to 100%. And this means that exchanges no longer even need to place the positions of such traders on the real market, but just right away they can put all of the traders’ deposits in their pockets. That is why the number of offers to trade with high leverage has rocked over the past year. And now, even the most top exchanges are doing traders a disservice. Considering the rapid penetration of cryptocurrencies into all sectors of society almost everywhere around the world, the behavior of these “businessmen” can be described by a well-known idiom: “A fool and his money are soon parted”. Let’s leave the moral aspect of these actions beyond the scope of this article; this is just a statement of fact.

Now let’s talk about the lending of funds, this is the other side of margin trading. In ordinary markets, liquidity for margin trading is provided by brokers, and their liquidity is provided by banks and other financial institutions. In the crypto market, mainly liquidity for margin trading is provided by the exchanges, from reserves or funds that they borrowed from other users at a certain annual % (lending). For example, now, the well-known exchange N1 is ready to provide borrowed funds to traders for margin trading in BTC at 11% per annum. But it is interesting to note that interest rate which is offered to users who have lent their funds – approximately 3% per annum. Accordingly, the difference between these rates is the profit of the exchange.

And all of the above would not be such a big deal if top exchanges played honestly. But the fact is that by lending funds you give them to a “term deposit”. Meanwhile, these funds are most likely to be used by exchanges to manipulate the market and play against traders. At the same time, unlike whales, exchanges always know exactly all the margin orders of users, and they can accurately calculate how much, when, and in which direction the rate should be changed to benefit the most. Probably, many of you have read about claims against one of the most popular crypto derivatives exchanges.

What do we offer, the 50x.com exchange team?

We propose to start changing the rules of the game in this market. And more recently we launched a transparent system of spot margin trading and lending on our platform. Now, any holder can lend their funds, and at the same time, any trader can take out a loan at the most favorable interest rates. Thus, lenders will receive the real fees that traders pay, and traders will be able to take out loans on better terms, in contrast with other exchanges.

We offer leverage for loans up to 3x, which allows you to minimize risk for margin trading. Moreover, the uniqueness of our quantum trading core, based on Any2Any technology, allows to use all of your so-called trust coins on the account (now, it is BTC, LTC, ETH, USDT, TUSD, USDC) as collateral, lend/borrow funds, and also trade any of coin present on the exchange to any other.

If you wish to learn more about 50x.com, visit their website.

Source: https://www.livebitcoinnews.com/margin-trading-and-lending-on-the-crypto-market/

Blockchain

Eyeing EU Banks, Hex Trust Teams With SIA on Crypto Custody

A multinational payments firm is partnering with cryptocurrency custodian Hex Trust to help its European banking clients hold digital assets.

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Multinational payments firm Sia is partnering with cryptocurrency custodian Hex Trust to help its European banking clients hold digital assets.

“When you have one bitcoin, it’s not a big problem, but when you start adding 10, 20 or 100, you have a treasury and you have to decide where to store this,” said Daniele Savarè, SIA’s innovation and business solutions director. “We are discussing digital custody needs with banks in Europe.” 

The firm is also helping banks manage and safekeep security tokens and central bank digital currencies, he added.

Through SIA, Hex Trust plans to offer European banks the software to custody digital assets on behalf of their customers. Hex Trust will also act as a sub-custodian for banks that don’t want to directly offer the service, said Hex Trust CEO Alessio Quaglini. 

Currently, Hex Trust works with three banks – Mason Privatbank Liechtenstein AG and two unnamed Asian banks. Quaglini said Hex Trust has 10 other banks that are exploring the custodian’s products.

Going forward, SIA will be the primary distribution partner for Hex Trust to offer digital-asset services to banks in Europe, Quaglini said. 

Source: https://www.coindesk.com/hex-trust-sia-crypto-custody-eu-banks

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Blockchain

Collider Labs Raises $1M to Invest in Blockchain Startups

The venture builder is seeking to invest in early-stage startups with a focus on transparency, privacy and “fairness.”

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Collider Labs has raised $1 million to be invested in early-stage blockchain and cryptocurrency startups.

In an announcement Thursday, the venture builder said the raise had brought on board several notable limited partners including Efficient Frontier CTO Alon Elmaliah and Follow [the] Seed Founding Partner Andrey Shirben.

Collider provides funding and liquidity and actively participates in building up startups alongside their communities and founders, according to the firm’s founding partner, Avishay Ovadia.

The company is actively seeking to invest in early-stage blockchain and crypto startups globally, with a focus transparency, privacy and “fairness.”

Collider “is a venture builder that somewhat resembles an accelerator” Ovadia said. With some “key characteristics” that differentiate it from a typical accelerator.

Venture builders, also known as startup studios, pair with early-stage startups and utilize their own ideas and resources to, if all goes according to plan, construct viable enterprises.

According to Ovadia, Collider forms partnerships with founders, invests in teams and works alongside them as what he calls “Investors in Residence.”

Source: https://www.coindesk.com/collider-labs-raises-1m-to-invest-in-blockchain-startups

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Voyager Agrees to Buy LGO Markets and Merge 2 Firms’ Tokens

Two cryptocurrency trading firms are merging, and in a rare twist, so are their tokens.

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Two cryptocurrency trading firms are merging, and in a rare twist, so are their tokens.

Voyager Digital, a publicly traded digital asset brokerage with offices in New York, has agreed to buy LGO, a French crypto exchange primarily serving institutional investors, as the company expands to Europe.

The transaction requires regulatory approval, which the parties said they expect to receive by the end of this year, along with the token swap. The value of the deal will depend on the value of Voyager’s shares, and the firms’ tokens, at closing; at current prices, it would be in the low seven figures.

As such, this deal is dwarfed by this year’s blockbuster crypto M&A deals such as Binance’s acquisition of CoinMarketCap, estimated to be worth $400 million, and FTX’s $150 million deal to acquire Blockfolio.

Read More: ‘They Have the Users’: Binance CEO Explains Why He Bought CoinMarketCap

What makes this deal unusual is that the two companies’ utility tokens, VGX and LGO, will be swapped into newly minted tokens featuring decentralized finance (DeFi) functions such as community governance and staking at an initial interest rate of 7%.

“We think this is really taking the old-school mergers and acquisitions to the token world, which hasn’t been done before,” Steve Enrlich, Voyager’s co-founder and chief executive officer, told CoinDesk.

Upon completion, Voyager, which is publicly listed on the Canadian Securities Exchange, will issue one million shares for the acquisition and operate in the European retail market with LGO’s Virtual Asset Service Provider registration with the French Financial Markets regulator (AMF). All activities will be conducted under the Voyager brand and LGO will discontinue its institutional services on Oct. 31. Shares of Voyager closed at C$0.67 ($0.51) on Wednesday. 

Read More: Voyager to Pay Interest on DeFi Tokens to Gain Brokerage Clients

Hugo Renaudin, co-founder and chief executive officer of LGO, told CoinDesk that the French company made the deal after it decided to shift its focus from institutional clients to increasing value for its token holders.

“The key decision-maker is what will bring the most value to our tokens,” Renaudin said. “So we have this token. We have token holders and they’re mostly retail [clients].”

LGO launched an initial coin offering (ICO) in February 2018, according to its website, which raised 3,600 bitcoin (worth about $36 million at the time). The company’s white paper shows that 60% of the tokens were distributed through a pre-sale process, while 20% of the supply went to LGO’s founders and advisors.

At its peak in April 2018, the LGO token’s market cap was nearly $40 million, according to data from CoinMarketCap. On Wednesday, that value was calculated to be $1.5 million. 

Renaudin told CoinDesk that the company’s other option would have been focusing on better serving its institutional clients, which means its spot exchange would have to provide new and exotic derivatives products. After consideration, he said that the team had decided to change its focus to retail customers instead.

The merger comes during a time of regulatory crackdown on crypto derivatives trading around the globe. Popular crypto derivatives exchange BitMEX was charged by the U.S. Commodity Futures Trading Commission (CFTC) with facilitating unregistered trading activities, while in the UK, the Financial Conduct Authority (FCA) has banned crypto derivatives for retail consumers.

This is not the first acquisition by Voyager, which went public in early 2019 in a reverse merger with the shell of a Canadian mineral exploration company. Previously, it acquired wallet startup Ethos.io for about $4 million.

Read More: Voyager CEO Says Revenue Growth Accelerates 8-Fold as DeFi Trading Surges

Voyage’s revenue in the most-recent fiscal quarter, which ended Sept. 30, surged to about $2 million, compared with $1.1 million during the fiscal year ending in June.

“We are becoming the financial service firm of the future, which means I will look at acquisitions that can add products, customer assets to the platform, or tokens and other communities that can be accretive to what we are trying to do,” Enrlich said. “And adding these pieces together we are going to either do it organically or through more acquisitions.”

Disclosure

Source: https://www.coindesk.com/voyager-acquires-lgo-token-merger

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