Unregulated crypto derivatives exchanges are becoming too risky

Unregulated crypto derivatives exchanges are becoming too risky

  • Ali Raza
  • 19th May, 11:34
  • BitOoda's Tim Kelly recently commented on the state of crypto derivatives trading on unregulated exchanges.
  • He noted that these exchanges will destroy trading with leverage once they start going down.
  • Meanwhile, regulated platforms which do seem limiting, also appear to be growing in popularity.

It has been over 11 years since the crypto industry had emerged, and over that time, it managed to diversify rather well. There is plenty of different products, with more of them emerging all the time. At the same time, the derivatives space is becoming more and more active and attractive to traders and investors around the world.

While this sector is not exactly new, it only started getting the attention it deserver recently. However, another thing to note is that the most popular platforms in the sector are the ones that are not regulated.

The founder and CEO of BitOoda, Tim Kelly, concluded as much during the recent interview on the ‘On The Brink’ podcast. Kelly stated that “I don’t know how you can possibly run unregulated derivatives exchanges. It does not matter if you are based in Antigua or Panama or wherever the location, the regulators are going to come down. There is no running. Anyone operating an unregulated derivatives exchanges, I don’t care why they are, it’s a binary risk.

Trading with leverage has become a very popular way to trade in the past few years. Risk-takers became quite interested in trying their luck and skill, but they can rarely do it on regulated platforms, at least to an extent they are interested in.

Regulated vs unregulated platforms: Which ones will dominate?

Of course, there are platforms like CME and even Bakkt. However, while fully regulated and safe, these platforms are also very limited, as they only allow low leverage.

Meanwhile, like BitMEX and Binance exchanges allow anywhere from 100x to 125x margin, which is much more exciting for the experts of the trading world.

Kelly, however, does not agree with it. He said that these exchanges will go down sooner or later, and when they do, they will take their clients with them. When it happens, it will ruin the 100x leverage ecosystem. He concluded by calling it all a ‘complete nonsense.’

While his concerns do make sense, historically, it was unregulated platforms that attracted all the volume. Even so, the fact that regulated platforms are now starting to work with crypto is more than enough to start attracting many to them. Traders are currently torn between high leverage and high earnings and security of regulated platforms, and judging by the recent figures, it seems that regulated platforms are beginning to catch up to more loose unregulated ones.

By Ali Raza
A journalist, with experience in web journalism and marketing. Ali holds a master's degree in finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of cryptocurrency publications. Raza is the co-founder of 5Gist.com, too, a site dedicated to educating people on 5G technology.

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