Why would anyone want to launch a margin trading exchange when a spot trading exchange sees more volumes?
That’s a good question and one I endeavour to answer here. Margin trading is not for novice traders, and it can seem much more daunting than spot trading. Consequently, you’ll see far more users on a spot trading exchange than a margin trading one.
There are several good reasons why a margin trading platform is good for users, the market, and business in general. It’s a mix of personal, professional, and business motivations that have driven me to launch Overbit, all of which I describe below.
Now, this may be hard to believe but, how would something that is typically difficult for novice traders to understand be a better experience?
Well, for one thing, we offer novice traders an easier time as they learn how to margin trade. Sure, margin trading is more challenging than spot trading, but it will become an even more critical part of the market as time passes. It’s best to give traders just the platform they need to make as much as they can, out of the derivatives market.
A lot can be done to make margin trading more approachable for newbie investors, and this approach seems to be distinctly lacking on other exchanges. We are certainly trying much harder to bring the same level of features and support to the margin trading market as there is in the spot trading market.
Specifically, there are several ways one can do this, including better incentive programs, an education system, and a strong outreach program where the benefits of margin trading are well explained. The latter is especially important and brings me to my second reason for launching Overbit.
The margin trading market could do with more traders, and more traders could do with margin trading.
I firmly believe that people can hedge positions and manage risks much better with the derivatives market, just as the hedge funds do in traditional markets. It is a vital part of any serious investor’s portfolio — a complicated one, no doubt, but an essential part nonetheless.
While this niche is seeing significant increases in volumes, it is not at the level that it should be at. That may partly be due to the complexity, but I know that this is something that can be overcome.
Pulling more people into margin trading would give traders a new investment vehicle to work with, one that is brimming with return potential. Meanwhile, assets benefit from the price stabilising effect of the futures and options market, and the overall market is better for it — cue Reason #3.
Yes, margin trading and derivatives are good for the market. There is evidence that points in this direction. If it weren’t any good for the market, you wouldn’t have such a method in traditional markets.
At Overbit, we’ve discussed how margin trading can help bring some much-needed stability to Bitcoin and other cryptocurrencies. This is true for commodities and sectoral indices also.
The derivatives market has a price leading effect on the spot markets. Traders will trade after the movement and volumes on derivatives platforms, which tends to weed out weak hands and ill-judged investments. Eventually, this levels out price spikes in either direction, thereby bringing some stability. And the market could do with more stability right now.
It could also do with one more thing — choice.
Whilst there are many cryptocurrency exchanges offering margin trading, the number pales in comparison to spot markets. This, in part, contributes to the smaller number of traders on the derivatives market.
Overbit was conceptualised as a comprehensive margin trading platform that would ease novice traders into margin trading, giving them a plethora of features and options to make the whole process simpler.
Currently, the choices that are available aren’t as newbie-friendly as they could be. There is a lot of work to be done in this regard, but if done correctly, it could bring about a monumental shift in how the market operates.
Not only will people see margin trading as less of an alien, incomprehensible matter, but they will realise that it may be desirable for their long term portfolio goals.
The last one is a combination of all the above reasons. All the preceding reasons have brought me to the point where I have made it my goal to help build the best margin trading platform out there — one that is both approachable for beginners and feature-rich for experienced traders.
Some individuals and teams find their calling in developing a clever DApp or a new protocol; I believe my purpose is to bring margin trading to the forefront in the cryptocurrency space. It is absolutely possible for things to be improved, and Overbit will attempt to do so in every possible way.
It may be a long and arduous journey, but I know margin trading and the derivatives market will hold a big place in the cryptocurrency space. As the months pass by, volumes will increase, and the chatter among the crypto community will grow. Novice traders will slowly trickle towards margin trading before it swells with many thousands of users.
That ideal scenario is what keeps me going and motivates me to face all the challenges that a CEO encounters in running a cryptocurrency company. It will be a long and tough road, but it will be worth it, for you, me, and everyone else involved.
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