Bitstamp and Silvergate Bank: A New Partnership
In the world of cryptocurrency, partnerships can lead to groundbreaking opportunities. Bitstamp, the twelfth-largest cryptocurrency exchange, has teamed up with the cryptocurrency-friendly Silvergate Bank to pilot a value-packed Bitcoin (BTC) leveraged trading option. This partnership, announced on January 14, aims to leverage the capabilities of Silvergate’s innovative Silvergate Exchange Network (SEN) Verve service.
What’s in Store During the Pilot Phase?
During this initial pilot phase, Bitstamp will offer leveraged trading strictly to select institutional customers. Talk about VIP treatment! For the moment, the only digital asset eligible for collateral is Bitcoin. If you’re wondering where your precious BTC will hang out, don’t worry; Bitstamp will be the custodian, ensuring your funds are under a watchful eye while having the privilege of being Silvergate Bank’s designated exchange partner.
Silvergate Bank: The Crypto Buddy
Silvergate Bank has hitched its wagon to the cryptocurrency train, forming partnerships with significant players in the field. For instance, last August, the Winklevoss twins’ creation, Gemini, made headlines by joining forces with Silvergate’s SEN network, enabling 24/7 fiat transfers. The bank’s client roster is substantial; as of March 2019, it served around 542 crypto-related clients, catering to exchanges, miners, custodians, and global investors alike.
Understanding Crypto Margin Trading Risks
Now, while leveraged trading may sound appealing, it’s essential to understand the double-edged sword it can be. By allowing traders to borrow funds, the potential for profit rises dramatically, but so does the risk. The possibility of losing more than your initial investment elicits a cautionary warning from exchanges, often recommending that amateur traders steer clear of such financial gymnastics.
Regulatory Scrutiny: A Call for Caution
As the leveraged trading sphere garners more attention, Japanese regulators are tightening their grip. Recent reports reveal that the Japanese Financial Services Agency (FSA) is contemplating a reduction in leverage rates for cryptocurrency trading from 4x to 2x. Why? To shield investors from the perils of excessive speculation and the volatility that comes with it. As we approach April, expect these regulations to take effect swiftly, underscoring the importance of prudent investing in this wild west of digital currencies.
