The Risks and Limits of Leverage Trading on Coinbase International

The Risks and Limits of Leverage Trading on Coinbase International

Coinbase International Exchange recently announced a significant change in its leverage limits for perpetual future contracts. The platform emphasized the benefits of these changes, but it is crucial for traders to understand the risks associated with leverage trading. This article explores the new limits and their potential impact on investors.

New Leverage Limits

Coinbase International Exchange proudly declared an upgrade to 10x leverage on all its perpetual futures contracts. This increase aims to empower traders by enabling more efficient trading strategies. However, it is essential to note that this higher leverage also comes with heightened risks.

According to Coinbase International, once users reach the 10x limit, they can still execute transactions. However, any new transactions must comply with the leverage rates stated in the platform’s Default Initial Margin (DIM) rules. Furthermore, the company has introduced a maximum notional value limit of $90,000 for all positions belonging to an Ultimate Beneficial Owner (UBO).

Specific Asset Limits

Apart from the overall leverage limit, Coinbase International has implemented specific limits for individual positions involving Bitcoin (BTC), Ethereum (ETH), and 13 other assets. These limits are measured in the respective cryptocurrencies, emphasizing the platform’s commitment to risk management.

Coinbase International acknowledges the need for continuous evaluation of leverage limits. Therefore, the platform commits to frequently reviewing and potentially increasing these limits in the future as its activities expand. However, it is crucial to remain cautious and not solely rely on these potential higher limits.

Perpetual futures are a form of derivative contract that allows traders to speculate on future prices without a definite expiration date. While they offer significant profit potential, they also pose substantial risks due to leverage. It is vital for investors to comprehend and evaluate these risks before engaging in leverage trading on Coinbase International.

Coinbase International acknowledges the high-risk nature of leveraged trading and warns that it may not be suitable for all investors. Therefore, traders must carefully consider their investment aims, risk appetite, and experience. It is recommended to engage in leverage trading only if the investor fully understands the potential consequences and is willing to accept the associated risks.

Coinbase International is the international trading arm of Coinbase, a prominent cryptocurrency exchange. Initially focusing on providing perpetual futures trading to institutional investors, the platform expanded its services to retail investors. Coinbase International operates under the supervision of the Bermuda Monetary Authority (BMA) and is accessible to customers in certain countries outside the United States.

While Coinbase International’s elevation of leverage limits may seem enticing for traders, it is crucial to approach this opportunity with caution. Proper risk assessment and understanding of leverage trading are paramount to mitigate potential losses. Investors must carefully evaluate their suitability for leveraged trading and consider their long-term investment goals before engaging with Coinbase International’s leveraged products.

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