Margin Trading For Stablecoin Tether Launched By Bitfinex
Bitfinex, a Hong-Kong based crypto exchange has recently announced that they have begun margin trading for the most popular stablecoin, Tether (USDT.) The trading point currently available are USDT/USD. The decision has been taken to apparently to give a better price discovery avenue and permit the users to hedge the exposure taken on stablecoins.
The blog post for the announcement by the exchange says:
“At Bitfinex we work tirelessly to ensure our platform reflects the needs of professional traders, offering market differentiating order types for unique trading strategies. Today, adding margin trading on USDT/USD pair will not only allow for more efficient price discovery but in an important move for risk management, unlock the ability to hedge the exposure taken on stablecoins. Along with a dedicated lending market, USDT will be available as collateral for margin positions.”
Margin trading refers to the practice of using borrowed funds from a broker to trade a financial asset, which forms the collateral for the loan from the broker. Since such use of financial leverage can potentially magnify gains but could also saddle the trader with devastating losses, leverage has the well-deserved reputation of being a double-edged sword. Margin refers to the number of funds that the trader or investor must personally put up from his or her own resources and can vary widely depending on the asset or instrument.
Apart from the listing of Tether, Bitfinex also revealed they are enabling margin trading for BCH/ABC (BAB) and BCH/SV (BSV) pairs.
Tether Limited and the Tether cryptocurrency are controversial because of the company's failure to provide a promised audit showing adequate reserves backing Tether, its alleged role in manipulating the price of bitcoin, the unclear relationship with the Bitfinex exchange, and the company's apparent lack of a long-term banking relationship. Author David Gerard was quoted by the Wall Street Journal saying that Tether “is sort of the central bank of crypto trading … [yet] they don't conduct themselves like you'd expect a responsible, sensible financial institution to do.”
Apart from this, last month, Bitfinex became the subject of a probe by the United States Department of Justice (DoJ) in connection with alleged cryptocurrency market manipulation.