Leverage trading in the crypto world is rather popular, especially with traders looking to boost their earning potential. Binance has been running leverage trading on a range of altcoins for a few months now, and it’s just announced that it’s adding LINK to the platform. This is great news for crypto traders that like to use leverage, but it could also spell disaster for long-term LINK holders.
Leverage Means More Volatility
As most altcoins like LINK have relatively low trade volumes, it has traditionally made trading them on leverage a little tricky. However, if Binance creates a liquidity pool, it can successfully launch margin trading of the altcoin. This margin trading in turn pumps up the trade volume and increases the volatility, so long-term bag holders will become subjected to drastic price swings. LINK has already been rather volatile over the past few weeks, but this new move from Binance will see that volatility increase further.
Ethereum Classic Enjoying a Nice Boost
Earlier this week, Binance also added Ethereum Classic (ETC) to its leverage trading platform. In the days following the move, ETC saw a rather nice price hike. This price rise is directly on the back of the Binance leverage listing, and we’ve seen this type of action happen multiple times before with cryptos added to any of Binance’s platforms.
Leverage trading is incredibly popular, and more crypto exchanges are now trying to find ways to create liquidity to cater for the demand. Back in April 2019, Liquid Exchange started offering a huge leverage of 1,000:1 on Bitcoin CFDs, creating a huge surge in popularity for the products. Despite Binance capping the max leverage at 75:1, we will likely see a whole new wave of crypto traders enter the margin trading space.