Gemini Expands Derivatives Trading Options
Esteemed cryptocurrency exchange Gemini, operated by the Winklevoss twins, has broadened its offerings by allowing users to employ a wider range of digital assets as collateral in derivatives trading. As of now, traders can utilize not only Bitcoin (BTC) but also various altcoins including XRP, Shiba Inu (SHIB), Dogecoin (DOGE), Solana (SOL), and Bitcoin Cash (BCH) for this purpose. This expansion comes after the platform first introduced cross-collateral capabilities for derivative transactions in early 2024, which initially permitted only BTC as a collateral option.
Understanding Cross-Collateral Trading
The process of using cross collateral allows traders to leverage multiple types of cryptocurrency rather than just stablecoins like Tether (USDT). This innovative feature aims to maximize trading efficiency by enabling users to utilize their idle assets. When users opt to engage in derivatives trading, they must deposit collateral, which acts as a safety net to cover any potential losses incurred during market fluctuations.
The way the system functions involves calculating the total value of the user’s margin asset, which determines how much collateral can be used to maintain active trades. For example, if a user holds 1,000 DOGE valued at approximately $226, alongside 1 SOL priced at about $183, and 10 XRP worth around $31, their total collateral pool would be close to $440. This amount could then be deployed to support leveraged positions in derivatives trading.
Risks of Margin Trading
However, it’s crucial for traders to remain aware of the risks associated with margin trading. In the event of declining market conditions, the platform has the authority to liquidate the user’s collateral at any time. This means that traders could potentially forfeit all their collateralized digital assets. Moreover, tokens like XRP and SHIB are particularly susceptible to rapid value declines during significant market downturns. For instance, on July 24, XRP experienced a sharp decline of nearly 10%.
To mitigate risks associated with margin trading, it is generally advisable for traders to diversify their collateral and consider using lower leverage.
