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Binance possibly adding margin trading and creating Stablecoin as Tether-Bitfinex implode


Binance is generating constant headlines this year as it continues to expand its operations and move ever closer to becoming the all-encompassing Google of crypto. Last week, Binance Coin (BNB) became the first major crypto to record a new all-time high in 2019 following news of the launch of Binance’s own blockchain network and a new fiat-to-crypto exchange in Singapore. While BNB has slipped from that all-time high in the week since, the price has been rising again, jumping 8.76% within 24 hours as rumors circulate that Binance may be adding margin trading to its platform and launching its own stablecoin.

Binance’s growing ecosystem now includes the ICO incubator Binance Labs, the Binance Chain blockchain network, a decentralized exchange (DEX), fiat gateways in Europe, Singapore, and other regions, and its core product – the world’s most popular crypto-to-crypto exchange. While its increasing moves to cover all bases within the crypto space have drawn comparisons to Google, a recent podcast calling high-profile CEO Changpeng “CZ” Zhao “the Mark Zuckerberg of crypto” prompted a Forbes article and several tweets from CZ himself.

While still unconfirmed, CZ has made statements on Twitter which have led many to speculate that margin trading and a Binance stablecoin may be coming. Margin trading would allow cryptocurrency traders to use leverage to increase their positions and go long or short on crypto prices. Stablecoins are tokens which are (in theory) backed 1:1 by real currency, so their price shouldn’t deviate from the value of that currency. They’re popular with crypto traders as they provide a safe haven from market volatility without requiring users to withdraw their funds completely.  With the largest stablecoin Tether currently in serious trouble, it may be the perfect time for Binance to launch a stablecoin of its own.

Margin Trading Allowed?

Rumors that Binance will be adding margin trading began a month when Redditor /u/enriquejr99 discovered that the text “isMarginTradingAllowed” had quietly been added to Binance’s API. However, “isMarginTradingAllowed” was set to “false” for all 482 of Binance’s trading pairs. Then yesterday, /u/lifofifo discovered that “isMarginTradingAllowed” has been changed to “true” for nine trading pairs. Binance CEO Changpeng “CZ” Zhao seemed amused by the discovery in a Tweet that most have taken to mean that Reddit’s prediction of margin trading soon being available on Binance are true.

The nine trading pairs for which margin trading is now set to “true” are BTC/USDT and Bitcoin (BTC) and US Dollar Tether (USDT) trading pairs for Binance Coin (BNB), Ethereum (ETH), Tron (TRX), and XRP. There is still no official confirmation of when (or even if) margin trading will go active on these trading pairs, but most expect it to happen soon.

In February, CZ told the Venture Coinist YouTube channel that margin trading was a feature he was interested in adding to the platform, but that security products and development of Binance’s DEX were being prioritized. CZ explained that margin trading can be highly profitable for exchanges, as they can collect fees and interest on the leverage in addition to usual trading fees.

CZ mentioned some of the risks associated with margin trading during the interview, including the possibility that traders may try to manipulate market prices through spot trading when contracts are close to being settled. However, he also stated that such activity was unlikely to have any long-term effect on the price of a cryptocurrency.

Binance Stablecoin next?

The uncovered margin trading code shows that USDT is likely to be the only stablecoin available for use with margin trading. This makes sense, as although USDT is one of three stablecoins available on Binance, its trading volume far exceeds that of Paxos Standard (PAX) or US Dollar Coin (USDC). The top seven USDT trading pairs all had a higher trading volume than BTC/PAX over the past 24 hours, while nine USDT trading pairs beat BTC/USDC’s trading volume. The top-ranked USDT trading pair, BTC/USDT, had a 24-hour trading volume of more than $187 million, compared to less than $24 million for BTC/PAX and just under $11 million for BTC/USDC.

But Tether’s enduring popularity may surprise those who have been following recent headlines. On April 25, New York Attorney General Letitia James issued a press release announcing that Bitfinex and Tether were being investigated for allegedly covering up the loss of $850 million by moving funds between the two entities, both of which are owned by iFinex. Many have long doubted Tether’s claims to be backed 1:1 by real US Dollars, and those suspicions were all-but confirmed last month when Tether subtly changed the wording of the terms listed on its website. Previous versions of the terms still accessible via the Internet Archive show that where Tether once claimed “[every] tether is always backed 1-to-1, by traditional currency held in our reserves,” this text now reads “[every] tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties.”

There is a growing feeling that things are going to get worse for Tether and Bitfinex in the near future. Bitcoin is currently trading at $5,945 on Bitfinex, compared to $5,722 on Binance, while CoinMarketCap lists Bitcoin’s aggregated price at just under $5,710. Premiums such as this are often associated with major trouble at an exchange, with prices rising as users rush to cash their funds out. Research from CoinCompare states that all exchanges which use Tether as a trading pair are experiencing some kind of premium, with Bitfinex the most seriously affected. Coinbase Pro, which allows Bitcoin to be bought directly with real US Dollars, is currently seeing Bitcoin prices of $5,601 – $121 less than Binance and $343 less than Bitfinex.

On April 29, CZ tweeted that Binance was about to move a large sum of USDT to a new cold wallet. The intention of the tweet seems to have been to avoid market panic by making sure it didn’t look like large sums were being moved in response to Tether’s possible implosion.

If Tether does implode, it may be the perfect time for Binance to add a stablecoin to its ever-growing ecosystem of products and services. CZ teased on Twitter just a few days ago that a stablecoin might be in the works, responding to a tweet suggesting Binance launch its own stablecoin with “careful what you wish for.”

Binance would be entering a crowded field if it does launch its own stablecoin. While Tether was for a long time the only widely-used stablecoin, several others have been launched more recently. But with the convenience and reputation of the most popular crypto-to-crypto exchange behind it, a Binance-backed stablecoin would likely find it easy to achieve large-scale adoption.

About Christopher Williams

Christopher Williams is a British writer based in South Korea with a strong interest in emerging technologies, cryptocurrency, and the development of decentralized apps.

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