World-renowned cryptocurrency exchange, Binance, has disclosed that it will be taking down all its FTX leveraged tokens along with their trading pairs.
The exchange made this announcement is an official blog post late last week. The reason cited was user difficulty in understanding the basics of leveraged tokens and what trading with them entails.
So, all FTX leveraged tokens and their trading pairs will cease to be available on Binance from March 31, 10 AM (UTC).
This news, however, comes as a big surprise to a lot of Binance traders as FTX leveraged tokens listing took place barely two months back.
The exchange also advised traders to trade out their leveraged tokens or better still withdraw them at least two hours to the scheduled delisting time.
According to the blog post, however, users would not be facing any loss even if they failed to carry out these actions. Binance pledged to credit the account of anyone still holding the tokens with BUSD within two weeks.
Why this surprising move to delist?
Leverage tokens can be quite as complicated as they are advantageous. Simply put, it allows users to trade much more crypto tokens than they actually own. Users can bet on the future price of crypto and make huge profits when correct. Margin trading allows users to carry out such bets manually. Incidentally, it is a service offered by most exchanges.
With leveraged token, however, margin trading is automatically carried out. Like automated trading bots, they reinvest any profits made from these bets. As a result, they drastically reduce market risks but market fluctuations can cause devaluation over time.
In line with the delisting, Binance CEO, Changpeng Zhao, posted a series of tweets explaining the rationale behind the decision.
Re: Leveraged Tokens delisting. While these tokens rarely cause you to be liquidated, they will devalue over time as markets fluctuate up and down. They are not meant for long term holding. If you have an unrealized loss, holding for a come back is unlikely to work. 1/3
— CZ Binance (@cz_binance) March 28, 2020
The main reason for delisting is we find many users don't understand them. Even with pop-ups warning users each time, people still don't read it. Given they are some of the most actively traded token, it is bad for business to delist them. Not an easy choice. But …
— CZ Binance (@cz_binance) March 28, 2020
He rued the tough decision of delisting, but was quoted as saying, “Protecting users come first”.
Many users are, however, skeptical about the reason cited for the delisting. This is compounded by the fact that margin trading is much riskier than leveraged trading. Still, there is no indication of margin trading taking a backseat at present.
FTX and Binance
What is even more unusual is that Binance had invested an undisclosed amount in the derivatives platform only last December.
Speaking on the unfortunate news, CEO of FTX, Sam Bankman-Fried pointed out that Binance delisting showed that they “didn’t want to manage user education/support.”
1) Binance de-listing LTs; didn't want to manage user education/support
2) FTX listing LT USDT pairs to compensate
3) You can either send LTs to FTX wallet or they'll turn into BUSD on BinanceMore LT info: https://t.co/6HiWhiccP7
— SBF (@SBF_Alameda) March 28, 2020
He said that FTX would provide support for LT/USDT pairs for the users. He also urged them to send their leveraged tokens to the FTX wallet to avoid swapping for BUSD.
