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May 23, 2021

Yep

—a group of institutional/#bitcoin investors had this very convo yest. The derivatives-driven volatility not only gives SEC an excuse as u say, but it increases cost of capital for the ecosystem &delays its mainstreaming. Prob no way to stop the crazy leverage tho

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Jake Chervinsky

@jchervinsky

May 23, 2021

The speed & severity of this crash gives the SEC an easy excuse to deny this year's Bitcoin ETF proposals. Price action appears driven by derivatives trading on unregulated offshore exchanges, the SEC's big concern all along. I wouldn't rule an ETF out yet, but chances are low.

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and

People like

and other owners of exchanges should reduce the ability of traders to access extremely high leverage (i.e. 125 x is absurd). This would show a lot of integrity and would be good for the space long term.

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So FWIW I don't think the very high leverage is what causes these. Any 125x position would have to be liquidated after a 75bp move, which is almost immediately; the bulk of the liquidations likely came from accounts with ~4x-20x leverage who got liquidated after the initial drop

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Hi Sam. That is fair enough. But in a broader sense I think that offering traders the ability to access such high levels of leverage with ease is something that exchanges should reconsider moving forward to promote a more mature and healthy market. Thanks for all your hard work.

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fair!

1:13 PM · May 24, 2021Twitter Web App

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Sam-we shld discuss in our panel next week. 100:1 leveraged futures contracts have *VERY* high expected profit for exchanges bc vast majority are stopped out on a 1% move well before they pay out, so investor loses. If loss probabilities disclosed, far fewer would ever trade them

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I mean they have estimated liquidation prices clearly shown, no?

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