The risk of offering high leverages

19 May 2021

When a platform offers leverage or funds the customer to buy for more than the money in the account, the platform takes a credit risk. With Crypto exchanges offering 10 to 100x leverage (futures), on days like today, I wonder who monitors liquidity position of these platforms.

In regulated space, even with all checks & balances, brokerage firms once in a while on days of extreme volatility go bust. If exchange offers 50x leverage & say Bitcoin goes down 4% in one tick, a customer with $1K, can lose $2K. Additional $1K to be put up by the platform

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