Binance Delists All FTX Leveraged Tokens Due to Users’ Lack of Understanding
Crypto exchange giant, Binance has announced that it is going to delist all of its FTX leverage tokens and their corresponding trading pairs. The announcement came just after 2 months of adding the feature on its platform. Binance cited lack of understanding by the users on how these tokens work, as the main reason for the removal.
The announcement noted that Binance will delist all of the FTX leverage tokens at 10:00 a.m. on March 31. All users who are holding the token are being entreated to trade out of their existing leveraged token positions or withdraw their assets 2 hours earlier to the announcement.
According to the announcement, the platform will automatically credit the account of anyone who still holds the token, with the equivalent value held in each leveraged token at the time of delisting, in BUSD. This will be done within 14 days after the deadline.
Binance CEO, Changpeng Zhao tweeted that many users were still not understanding the leveraged tokens, despite the constant pop ups warning users each time. He acknowledged that these leveraged tokens are some of the most actively traded tokens on the platform, hence delisting them wasn’t an easy 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
However, Zhao further noted that users’ safety is always paramount to the exchange. Although leveraged tokens rarely cause users to be liquidated, Zhao claims they will devalue over time as markets fluctuate up and down. He added that if a user incurs an unrealized loss, holding for a comeback is not likely to work.
However, some users on Twitter are skeptical about the announcement, particularly since margin trading is far riskier. Leveraged tokens work somehow like automated trading bots by automatically reinvesting any profits made from margin trading. But the reinvestment is made in such a way that minimizes risk. However, they are not designed for long term holding as they devalue over time when market fluctuates.
Featured image courtesy of Shutterstock. Source: Cryptopress.