With a 24-hour trading volume of $199 Million, the Bitfinex cryptocurrency exchange is one of the largest names in the cryptocurrency markets. Based out of Hong Kong, the exchange has been a credible force in the cryptocurrency markets since 2012. As per the latest update from the Bitfinex Blog, the exchange has now introduced margin trading for Tether (USDT/USD pair).
This feature was introduced earlier yesterday - and is already live. The company has stated that margin trading has only been introduced for the USDT/USD pair as of now, but more stablecoins are expected to be added to this list soon. The post explains further, stating:
At Bitfinex we work tirelessly to ensure our platform reflects the needs of professional traders, offering market differentiating order types for unique trading strategies. Today, adding margin trading on USDT/USD pair will not only allow for more efficient price discovery, but in an important move for risk management, unlock the ability to hedge the exposure taken on stablecoins. Along with a dedicated lending market, USDT will be available as collateral for margin positions.
What is Margin Trading?
Margin trading, in the simplest of words, is basically trading cryptocurrencies based on borrowed funds. These funds will be issued to you in exchange for your existing cryptocurrency holdings as leverage. For example, if you have $1,000 in crypto-holdings and want to invest $500 more, you can use your existing funds as leverage and the exchange would issue you $500 - if you make a profit on that fund, you can keep the profit and return the principal amount. In case of a loss, the exchange will recover it from your funds.
Stablecoins on the Rise
Bitfinex, as well as Ethfinex, have been working towards introducing all the major stablecoins in the markets on to their platforms. Earlier in December, the exchange had announced that users would be able to get access to all six major stablecoins on both these platforms. These stablecoins include: Tether (USDT), USD Coin (USDC), True USD (TUSD), Paxos Standard Token (PAX), DAI (DAI) and Gemini Dollar (GUSD).
Stablecoins are getting popular of late - considering the fact that the cryptocurrency markets are going through a major wave of uncertainty, a large number of users prefer to transfer their crypto-holdings to stablecoins, which ensures that the value of their holdings (in USD) remains stable.
Stablecoins are cryptocurrencies which are pegged to a currency (or other such stable assets). Tether, for instance, is pegged to the US Dollar in 1:1 ratio - for every Tether that is issued to an investor, $1 is put into the account of Tether - which ensures that the price of the currency remains stable.
Of late, a number of major firms are introducing their own stablecoins. Circle and Coinbase teamed up together to create the USD Coin (USDC). The Gemini cryptocurrency exchange, owned by the Winklevoss twins started off with the Gemini Dollar (GUSD). For more information on stablecoins, check out our complete guide to stablecoins.
Stay tuned with us at Cryptoground for all the latest updates and news stories from the world of cryptocurrencies and the blockchain technology!