- Binance lists BCTUP and BTCDOWN leverage trading tokens today
- Listing comes after the exchange withdrew FRTX tokens due to a perceived lack of understanding in how they work
- Binance has changed to format to make them more suitable for long term holding
Binance is set to launch leverage trading tokens today two months after delisting FTX’s leverage trading tokens on the basis that customers didn’t understand them. The exchange has introduced its own version of the controversial tokens after “careful consideration of user requests and evaluation of existing leverage products”. Binance leverage tokens will start with BCTUP and BTCDOWN on Thursday with ETH and other assets expected over time, but doubts remain as to the rationale behind the decision and whether Binance customers really are ready for such tokens.
— Binance (@binance) May 12, 2020
Binance Reenters Leverage Token Market
Binance desilted FTX’s BULL and BEAR tokens from the exchange in March following a deluge of complaints from customers that they had lost money on the tokens, with the issues centering around the fact that the leverage tokens risked losing value while the underlying asset returned to the same value. Binance CEO Changpeng Zhao noted as much when trying to explain how the FTX tokens worked, stating that the tokens “devalue over time when markets (underlying assets) fluctuate back and forth.”
Due to a “lack of understanding of how leveraged tokens work”, Binance pulled the tokens, but are now ready to re-enter the market with their own version – the Binance Leveraged Token (BLVT).
Binance Assumes Community Has Educated Itself
Binance is seemingly confident that in the time between delisting the FTX tokens and their own token launch today that the community has educated itself on the whys and wherefores of leverage tokens in advance of their use. Those that have however have been wasting their time, as the Binance leverage tokens are different than those used by FTX.
FTX’s leverage tokens rebalance at the end of the day, where profits and losses are evened out to keep the amount of leverage the same, which is where the losses can happen. Binance’s tokens will not rebalance at the end of the day but instead when required which will alleviate this issue, or at least greatly reduce the likelihood of holders losing out.
Community Responds Negatively
The reaction to the news wasn’t exactly kind, with many pointing out the fallacy in Binance’s theory that a lack of understanding led to the FTX delisting:
What happened to protecting users and CZ’s concern that users didn’t understand leveraged tokens despite frequent pop-up warning? That changed when you came out with your own product?
— Larry Cermak (@lawmaster) May 12, 2020
@cz_binance “We are delisting the FTX tokens to protect our users”
Also CZ: “Here’s a bunch of leveraged tokens we made ourselves! Give us all your money kk”?
— Brot KnoblauchHaus (Parody account) (@BredGarlicHouse) May 12, 2020
Whether there will still be the appetite for leverage trading tokens on Binance after the FTX debacle remains to be seen, but in general it can only be a good thing if people are more cautious when using tem as any kind of leverage trading is not suited to about 90% of the crypto owning population.