Exchanges Cut Token Risk Values, Leaving Traders with Less Leverage

Two major cryptocurrency exchanges, Binance and Coinbase International Exchange, have made significant changes to their token risk values, affecting leveraged traders' borrowing capacity. On September 18th, Binance lowered the collateral ratio for six tokens: AUCTION, BLUR, GALA, HYPER, S, and SYRUP from 30% to 10%. This change means that a trader holding $100,000 of one of these affected assets would see their recognized collateral value drop by $20,000, from $30,000 to $10,000. The same update raised the collateral ratios for ARB, TAO, and WLD from 50% to 60%. Meanwhile, Coinbase International Exchange announced that 29 assets, including BNB, AVAX, and SHIB, will no longer be eligible as collateral on September 29th.

The changes are significant because they directly impact traders' borrowing capacity. A lower recognized value can reduce the margin cushion, making it more challenging for traders to maintain their positions. However, the outcome depends on the account's other assets, liabilities, and applicable risk tiers. Binance stated that its Cross Margin change affects the amount a customer can borrow or transfer out.

The selective repricing of token collateral ratios by Binance suggests that the exchange is adjusting its internal risk weights. The changes may impact aggregate borrowing capacity, which could rise or fall depending on the balances held in each asset. It's worth noting that a report by Glassnode and Bybit found that coin-margined collateral lost the majority of the tracked Bitcoin futures book and never regained it.