Binance Cuts Down Leverage on THETA Perpetual Contracts by 60% After ‘Classic Crypto Pump’
In the past week, we saw THETA rallying and recording more than 1,000% gains since the March crash.
Trader MoonOverlord called this a “classic crypto pump.”
Yesterday, the token hit an all-time high of $0.555 only to drop 48% to $0.286 and is currently trading at $0.335.
As we reported this surge in the token’s price was the result of its mainnet 2.0 launch and Theta Network’s collaboration with Google yesterday.
Just a day before this, the cryptocurrency exchange Binance also launched THETA/USDT futures with up to 50x leverage.
Technical analyst Loma pointed out that THETA prices continued to go up because of this margin.
“This is why giving an asset like this margin is a terrible idea. You have ppl who don't understand the different variables that come into play and end up treating it like spot w/ up to 50x more capital,” said Loma.
Leverage Not Good for Altcoins?
Today, the exchange announced changes to this with the maximum leverage available in the THETA/USDT perpetual contract now decreased to 20x, effective immediately.
Binance Futures also updated the risk and margin tiers of THETA/USDT where those with the notional position in USDT greater than one million will have a 50% maintenance margin and 100% initial margin.
Notional Position in USDT with up to 50k will have 1% in maintenance margin and 5% initial margin. The next batch of 5k to 25k gets 2.5% and 10% of each margin.
The subsequent 25k to 100k and 100k to 250k batches get 10% and 20% of initial margin respectively and a bump up of double the maintenance margin from the previous batch.
250k to 1 million gets 12.5% and 50% of maintenance margin and initial margin respectively.
This announcement also came with the regular warning of futures trading being a highly risky endeavor wherein an event of extreme price movement, there is a chance of getting all margin balance liquidated.
“Alts shouldn't even have leverage. They are already risky as is…,” noted Income sharks about this development.
If you think $THETA being listed on margin, 24hrs BEFORE the news event & AFTER going 12x was a coincidence… you're gonna have a hard time believing half the shit that goes on behind the scenes.
The more I find out about the industry, the more I'm shocked crypto is even alive.
— Loma (@LomahCrypto) May 27, 2020
However, these kinds of events aren’t unique to the crypto market, they happen the same in stock markets and Forex markets. It’s just easier in the cryptocurrency market because the liquidity here is less, especially for small-cap altcoins.
At the time of publishing, Theta is currently down 30% from yesterday, trading at $.33 with $171.67M in volume according to Nomics.