Global cryptocurrency exchange Binance has announced that it will delist all the FTX leveraged tokens and the corresponding trading pairs on 31st March. Binance added these tokens a couple of months ago. As per the announcement, ambiguity among the users regarding the use of these tokens is the main reason behind the delisting.
Binance has advised FTX token holders to trade their existing leveraged token positions or completely withdraw their assets two hours prior to the delisting. The exchange has also assured token holders that if they do not trade out or withdraw their tokens, then it will compensate them with equivalent BUSD worth within 14 days.
Binance CEO Changpeng Zhao tweeted:
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
Further explaining the reason for delisting in detail, Zhao said, “The main reason for delisting is we find many users don’t understand them. Even with pop-ups warning users each time, people still don’t read it. Given they are some of the most actively traded tokens, it is bad for business to delist them. Not an easy choice. But …”
Leverage Tokens explained
Leverage tokens basically automate the process of margin trading. Here is how this works! These tokens enable you to hold leverage positions and trade with far more cryptocurrency that you actually own, thus allowing you to place bets on the future price of crypto. Needless to say, this involves a lot of risks, but have to potential to fetch you large profits as well. In the case of margin trading, you need to execute the future betting process manually, but leverage tokens automate this process.
Considering that you made profits out of leverage trading, the leverage tokens will automatically invest the profit further at minimal risks. However, with margin trading, you are required to invest a withdraw manually. Having said that, leverage tokens are not safe for long term holding.
These ERC-20 tokens can are issued and redeemed through derivatives exchange FTX, in which Binance made an investment last year.
Binance’s decision to delist FTX leverage tokens has not gone down well with some users. Some believe that margin trading is far riskier, and it is not a wise step to delist leverage tokens.
A user tweeted:
Disappointed with the decision. People should know better and get educated before trading. Period. Customers looking to trade this token now have to move to FTX exchange. The token was also listed only last month, to have to delist so quickly on such short notice is sad.
— cryptotyger (@BrowNTyGeR) March 28, 2020
Replying to such tweets, Zhao assured that users are the top-most priority of Binance. He tweeted, “Protecting users come first. Seeing from comments in earlier posts, I expect some complaints still. If you dislike our decision for this delisting, check back on the prices of these tokens in a month’s time, and let us know if you still complain then.”