Some coins get more than their fair share of hate, but now there’s another way to make money when they crash. If you’re one of those hodlers who believes that XRP is another word for “Ripple,” or that “Bcash” is a valid move in Scrabble, then a set of new exchange offerings can make you even happier when they go down.
Kraken lets you put your crypto where your mouth is.
Kraken has expanded its margin trading offers to XRP and Bitcoin Cash, bringing the total number of leveraged assets to eight. Margin contracts allow users to “borrow” cryptocurrency against fiat or crypto collateral for leveraged trading, allowing traders to secure much higher profits—or losses.
Kraken traders will be able to borrow up to 500 Bitcoin Cash, with up to 3x leverage. For XRP, the limits are 5x leverage for XRP, for up to 2.5 million tokens.
Leveraged trading can bring high profits, with a bit of market foresight. For example, if you had opened a 2x leveraged short against Bitcoin Cash at the beginning of this month, you could have yielded profits above 100%, provided you were foresighted enough to close them at the lowest point. However, if you’d waited another week, your position would have been automatically closed and your collateral liquidated as prices recovered.
Huobi Puts EOS in the Derivative Game
Kraken’s not the only exchange that’s expanding their derivatives offerings. Huobi, another large cryptocurrency exchange, has recently expanded its derivatives market to include EOS, as well as Bitcoin and Ethereum.
“We’ve seen a great response to our Bitcoin and Ethereum contract services from a broad range of sophisticated traders,” said Huobi Global CEO Livio Weng, in a statement. “Along with that, we’re also seen strong demand to expand Huobi DM to other coin types as well. Adding EOS contract service is part of our ongoing efforts to address customer demand.”
Traders will be able to take up to 20x leverage against their collateral assets, with real-time risk supervision and a 20,000 BTC security fund against catastrophic failures.
In true Huobi fashion, the launch is also accompanied by an 8,888 EOS giveaway.
Margin trading is already available for these tokens on other exchanges, but the expansion of derivatives offerings is a sign that the market is starting to mature.
Although risky and more akin to gambling for the average investor, leveraged trading also offers important mechanisms for price discovery and market calibration for the sophisticated trading savant.
Because short contracts cause downward pressure on prices, they can prevent or restrain the effects of speculative bubbles like the one that occurred last year.
The author has investments in Bitcoin Cash and XRP, which are mentioned in this article.