In the early days of cryptocurrency derivatives trading, competition among exchanges led to an escalating race for higher leverage—20x, 100x, even 125x and 150x. While these sky-high multipliers boosted trading volumes and exchange revenues, they came at a steep cost: increased market volatility and severe risks to investor safety. Now, that trend appears to be reversing.
A significant shift is underway in the crypto derivatives landscape as major platforms voluntarily reduce maximum leverage offerings. This move marks a pivotal moment in the industry’s evolution—one driven by regulatory pressure, public scrutiny, and growing recognition of long-term sustainability over short-term gains.
👉 Discover how leading platforms are reshaping risk management in crypto trading.
The Rise of Extreme Leverage
The story of high-leverage crypto trading begins in 2016, when BitMEX launched the first 100x perpetual Bitcoin futures contract. At the time, it was a groundbreaking innovation that attracted aggressive traders seeking outsized returns. Arthur Hayes, BitMEX's co-founder, acknowledged the product catered to speculative retail investors—what he called “the degenerate gamblers” of the Bitcoin world.
But with success came imitation. By 2018, OKEx entered the fray with its own 100x leverage offering. FTX followed in April 2019, symbolically raising its cap to 101x—just one notch above competitors—and quickly gained traction among high-risk traders. Then, in October 2019, Binance upped the ante further by introducing 125x leverage on BTC futures.
Huobi and OKEx soon matched or exceeded these levels. In March 2020, Huobi rolled out perpetual contracts with up to 125x leverage. Later that year, OKEx extended 125x support across multiple assets, while smaller platforms like Blade and BitWell pushed limits to 150x.
This unregulated escalation created a dangerous feedback loop: higher leverage led to larger liquidations during market swings, which in turn amplified price drops and triggered more liquidations—a phenomenon clearly seen during the March 2020 "Black Thursday" crash and the May 2021 "519" market collapse.
During the March 12 crash, Bitcoin plummeted from $7,900 to $3,600 in hours. On BitMEX alone, over $1 billion in long positions were liquidated, overwhelming order books and deepening the sell-off. As Ari Paul of BlockTower Capital noted, much of the selling pressure wasn’t from panic-stricken holders but from forced liquidations on leveraged platforms.
These events highlighted a stark truth: excessive leverage isn't just risky for individuals—it poses systemic threats to the entire crypto market.
Regulatory and Public Backlash Mounts
As extreme leverage fueled both profits and pain, public sentiment began to turn. Tragic stories emerged of traders losing everything—and sometimes their lives.
In June 2019, Hui Yi, founder of Chinese crypto analytics firm BitYi, died by suicide after reportedly suffering massive losses from a 100x short position on Bitcoin. Though details remain unclear, friends suggested that financial ruin from leveraged trading played a critical role.
More recently, during the May 19, 2021 market crash, global liquidation volumes exceeded $4 billion (approximately ¥40 billion RMB). Social media flooded with accounts of wiped-out portfolios and emotional distress. In China, protests erupted outside Huobi’s offices; state media took notice.
On May 24, Economic Reference News, a publication under Xinhua News Agency, published an article titled "Urgent Need to Crack Down on Virtual Currency Speculation," warning that traders using 5x or higher leverage faced enormous risks in volatile markets. Two days later, another Xinhua piece questioned whether 100x leverage brought “instant wealth or instant bankruptcy.”
The Chinese government responded swiftly. On May 21, the Financial Stability and Development Committee called for strict action against Bitcoin mining and trading, emphasizing the need to prevent individual financial risks from spreading into broader social instability.
In response:
- Huobi suspended futures and leveraged services for new mainland Chinese users.
- Existing users saw their maximum leverage cut to 5x.
- Bybit restricted API access for users with mainland IP addresses.
- Smaller platforms like XMEX and BBX shut down entirely.
Globally, regulators followed suit. In June 2021, financial authorities in Japan, the UK, Italy, Thailand, and nearly ten other countries issued warnings against Binance for operating unlicensed derivatives services.
Faced with mounting pressure, Binance and FTX made strategic concessions.
On July 25, FTX founder Sam Bankman-Fried (SBF) announced the platform would cap leverage at 20x, citing concerns over market health:
“High leverage (>20x) is not healthy and is not a core part of the crypto ecosystem. Everything has limits.”
The next day, Binance CEO Changpeng Zhao confirmed that new users would be limited to 20x leverage, with plans to extend this cap to all users in the coming weeks.
👉 See how top exchanges are balancing innovation with investor protection.
Why This Shift Matters
While some traders may migrate to less-regulated platforms still offering 100x or 125x leverage—such as OKEx or Bybit—the decisions by FTX and Binance signal a broader industry pivot toward responsible finance.
Core keywords driving this transformation include:
- High-leverage crypto
- Derivatives regulation
- Market volatility
- Investor protection
- Leverage caps
- Forced liquidation
- Crypto risk management
- Exchange compliance
These terms reflect both user search intent and regulatory priorities. Their natural integration into discussions around platform policy changes enhances SEO visibility while maintaining editorial integrity.
Despite progress, challenges remain. Many offshore exchanges continue offering extreme leverage with minimal oversight. True reform will require coordinated global regulation—not just voluntary restraint by a few leaders.
Still, reducing leverage is a step toward aligning crypto markets with traditional financial principles: transparency, accountability, and sustainability.
Frequently Asked Questions (FAQ)
Q: Why are exchanges lowering leverage now?
A: Increased regulatory scrutiny and public backlash over trader losses have forced major platforms to adopt safer practices. Reducing leverage helps mitigate systemic risk and improves compliance posture.
Q: Is low leverage less profitable for exchanges?
A: Initially, yes—lower leverage can reduce trading volume and fee income. However, sustainable growth depends on user trust and long-term engagement, which responsible policies help build.
Q: Can I still find 100x leverage elsewhere?
A: Yes, some offshore exchanges still offer high-leverage contracts. But these often lack regulatory oversight, increasing counterparty and operational risks.
Q: How does high leverage increase market volatility?
A: When prices move sharply, highly leveraged positions get liquidated rapidly. These forced sales create downward spirals that amplify price swings beyond fundamental value changes.
Q: What’s a safe leverage level for beginners?
A: Most experts recommend starting with 3x to 5x or avoiding leverage altogether until gaining experience. Risk management should always precede profit-seeking.
Q: Will regulators ban crypto derivatives entirely?
A: Unlikely. Regulators aim to control risk—not eliminate innovation. Products with reasonable leverage caps and strong disclosure requirements are more likely to gain approval.
👉 Learn how compliant platforms are setting new standards in crypto trading safety.
The Road Ahead
Leverage is not inherently bad—it’s a vital tool in any mature financial market. But unchecked escalation turns tools into traps.
The retreat from extreme leverage represents more than policy change; it reflects a maturing industry learning from past excesses. As crypto seeks broader adoption by institutions and retail investors alike, responsibility must outweigh recklessness.
The actions of Binance and FTX may not end high-leverage trading overnight—but they set a precedent others will struggle to ignore. For the health of the ecosystem, this shift cannot come soon enough.