Binance Offers 50x Leveraged Bets on Samsung, SK Hynix as Critics Call It a Casino
Summary
- The world’s largest cryptocurrency exchange, Binance, has introduced derivatives on Samsung Electronics and SK Hynix with leverage of as much as 50x.
- Investors can add up to 50x leverage on KORU, a 3x leveraged ETF tied to the KOSPI, creating products with effective leverage of as much as 150x.
- Concerns are growing that there is no financial regulatory oversight for these high-risk leveraged products, raising fears over investor protection gaps and an outflow of domestic trading demand.
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World’s Largest Crypto Exchange Offers Up to 50x Leveraged Derivatives on Samsung, SK Hynix
KOSPI-linked products allow effective leverage of as much as 150x, with many users thought to be South Korean investors
Concerns are rising over the volatility of 2x leveraged exchange-traded funds tied to Samsung Electronics Co. and SK Hynix Inc. listed on South Korea’s stock market. Overseas crypto exchanges have gone much further, offering derivatives with leverage of as much as 50 times on the two stocks.
Binance, the world’s largest cryptocurrency exchange, launched products earlier this month that allow investors to take positions with up to 20x leverage on Samsung Electronics, SK Hynix and Hyundai Motor Co., according to the crypto industry on June 28. After drawing strong demand, it has since raised the maximum leverage on Samsung Electronics (SAMSUNGUSDT) and SK Hynix (SKHYNIXUSDT) to 50x.
With few investment restrictions, anyone with a South Korean won deposit and withdrawal account can buy Tether on domestic crypto exchanges such as Upbit and Bithumb, then transfer it to Binance for trading. The products are far riskier than anything available in the local market, and a substantial number of South Korean investors are believed to be using that route.
Binance also offers KOSPI-linked futures with effective leverage of as much as 150x. The exchange allows investors to add as much as 50x leverage on KORU, a 3x leveraged ETF tied to the KOSPI and listed in New York. That means traders could make as much as 150% if the KOSPI rises 1%, but lose their entire principal on even a slight decline.
Trading volume in KORUUSDT had already surpassed $754.4 million over the five days from June 22 to June 26. Cumulative trading in SKHYNIXUSDT from June 2 to June 26, less than a month after launch, reached $6.4213 billion, or about 9.8618 trillion won.
The problem is that South Korea’s financial authorities have no regulations in place for speculative products that are effectively akin to gambling. Instruments that could neither be launched nor listed in the domestic market are trading openly on overseas crypto exchanges, complicating consumer protection and siphoning demand from South Korea’s own market.
Kim Bong-gu, Hankyung.com reporter, kbk9@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.