Bitfinex has introduced margin trading for the USDT/USD market.
This feature effectively gives traders the ability to take out a leveraged bet against the failure of Tether (and also Bitfinex themselves).
— Bitfinex (@bitfinex) December 21, 2018
Capital risk management
Bitfinex stated: “Adding margin trading on the USDT/USD pair will not only allow for more efficient price discovery, but in an important move for risk management, unlock the ability to hedge the exposure taken on stable coins.”
This market could therefore be used as a proper “capital risk management” strategy. For example, if you make significant altcoin profits on Binance, you could then hedge your spot Tether risk (and the Binance platform) using this margin-enabled market.
Open to other stable coins
Bitfinex went on to outline that the option of stable coin margin trading is limited to USDT/USD, but as part of their commitment to providing a coin-agnostic platform, there are plans to introduce margin trading for the other major stable coin pairings when sufficient liquidity is reached.
That Bitfinex is open to enabling margin trading for a stable coin backed by a competing entity is interesting.
The reality is that the Tether pair trades with an $8 million a day market, whilst the other listed stable coins (USDC and TUSD) have 1,000 times less volume, with only a few Bitcoin traded a day.
However, this still represents a drop in the ocean for an enterprise that has traded over $2.5 billion themselves in the last seven days.