Sam Bankman-Fried Clarify Criticisms on Crypto Derivatives

Jafrin  |  Aug 31, 2021

FTX derivatives exchange's CEO Sam Bankman-Fried defended the derivatives market and justified his reasons for cutting down leverage on his crypto exchange in a recent interview with Forbes.

FTX CEO Endorses Crypto Derivatives

The CEO of FTX exchange, Sam Bankman-Fried, has claimed that crypto derivatives are a “misunderstood area,” arguing they are necessary for adding liquidity and efficiency in the crypto market.

“People will note that derivatives trade more volume in crypto than spot, which is true. But that is true of every asset class in the world.”

However, he did acknowledge the risks associated with derivatives trading, particularly when leveraged positions are forced to liquidations. For instance, in March, extreme liquidity resulted in $500 million worth of Bitcoin (BTC) being liquidated in just one hour.

He also clarified his reasons for lowering the leverage limits on his cryptocurrency exchange from 101x down to 20 times. The move inspired competitor exchange Binance to also cut down leverage trading limits on its platform.

“We did not have this on day one and it was the most requested feature from our users. They were refusing to use the platform unless we had it.”
“Any position that you're putting on with that level of leverage can't be absolutely crucial for efficient markets, and this is not something I felt was particularly important or good for crypto market health,” he added.

Crypto Industry Needs Regulation

In his Forbes interview, Sam further emphasized the need for the crypto industry to embrace regulations.

“I just wish that the industry were, as a whole, doing a more conscientious job of interfacing with regulators.”

In July, FTX Trading, the operator of FTX crypto exchange, announced the closure of a $900 million Series B fundraising, valuing the company at $18 billion, marking the largest fundraise in a crypto exchange’s history.

FTX serves the entire chain of cryptocurrency trading participants from retail and to pro investors, day traders, family offices, including institutional traders.

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