Sequel to Chinese authorities’ crypto regulatory clampdowns, Huobi (one of the world’s leading crypto exchange firms) has forbidden its users (new and current) from trading derivatives.
Celebrated Chinese crypto journalist, Collins Wu disclosed on Twitter that the top trading platform reduced its maximum possible trading leverage from 125x to less than 5x for current users. But China-based new users were forbidden from trading on derivates on the platform.
Collin Wu Tweet. Source: Twitter
Will Huobi Revert This New Policy?
No one knows when Huobi will revert this new policy or intend to make it a permanent policy. If the latter is the case, most China-based crypto traders will have no choice but to switch to other exchanges.
According to Wu, “the effect of this policy change might be a little stretched. But Chinese crypto traders who can’t trade highly leveraged contracts will have to switch to Binance. It is on record that most Chinese traders have accounts with the top three exchanges already. So, unless China authorities enact policies that will restrict, most Chinese investors will start switching to it right now.”
Chinese-based crypto traders face tough sanctions from authorities who remain hell-bent on increasing oversight regulations on virtual assets this year. After the top three China trade associations warned the populace against digital currency investments, Huobi Mall (Huobi’s mining section) announced earlier this month that it would no longer be running any mining operations in China again.
Authorities in the inner Mongolia province continue to enact and enforce stricter control measures on crypto mining operations.
Cryptocurrency analytics firm CoinMarketCap currently ranks Huobi global ranks among the top three crypto exchanges in the world. As of this writing, trading volume on the Huobi exchange is over $11 billion.
Effects of Huobi’s Leverage Policy Change
Experienced traders often use leverages to increase their trade positions and earn more profits. But, these high amounts of leverage can blow up a trader’s account if not correctly utilized.
One possible explanation for Huobi’s new policy change might be to conform with global exchange regulatory standards. Part of these standards states that exchanges must prevent retail investors from exposing themselves to huge or unnecessary risks.
China Ramps Up Its Crypto Disdain
Over the past 30 days, China has continued to enact and enforce policies that prohibit crypto mining and trading. Hence, several miners have sought safer mining places, notably Texas in the U.S.A., where renewable energy is abundant.
Authorities in inner Mongolia have already given crypto miners 60 days to stop operations. Hence, there has been an almost 40% decrease in the hash rate over the last few weeks. This is terrible news for the crypto market.
But the best permanent solution for these miners might be their switch to crypto-friendly regions where they can access sustainable resources. As crypto miners continue to leave China in droves, they will find solace in neighboring countries (such as Singapore and Hong Kong) and other places such as the U.S., which place lesser restrictions on crypto activities.