Derivatives trading on Gemini now includes XRP and SHIB as collateral options.
Gemini, the leading cryptocurrency trading platform owned by the Winklevoss twins, has introduced a new feature that allows users to use multiple types of crypto assets as collateral for derivatives trading. This groundbreaking development expands the options available to traders, offering increased capital efficiency and flexibility.
Starting July 24, supported crypto assets such as XRP, Shiba Inu (SHIB), Dogecoin (DOGE), Solana (SOL), Bitcoin Cash (BCH), in addition to Bitcoin (BTC), Ethereum (ETH), USDT, and GUSD, can be used collectively to open and maintain leveraged derivatives positions settled in Gemini Dollars (GUSD). This means that users no longer need to convert altcoins into stablecoins to meet margin requirements but can use a diversified portfolio of supported tokens as collateral.
To initiate this process, users deposit several supported crypto assets as a collateral pool. For instance, holding 1,000 DOGE, 1 SOL, and 10 XRP would form a combined collateral value (approximately $440 in this example) on which margin is calculated.
The platform applies collateral "haircuts" to adjust the collateral value according to the asset's risk/volatility. XRP and SOL have a 15% haircut, while DOGE and SHIB have a 30% haircut, meaning only 85% or 70% of their market value counts toward margin to mitigate liquidation risk.
The available collateral value supports leveraged derivatives positions settled in GUSD perpetual contracts. However, it's important to note that if the position incurs losses exceeding the collateral value, Gemini may liquidate the collateral, risking full loss of the assets used.
This system increases capital efficiency and flexibility by letting traders deploy idle altcoins in derivatives trading without selling or converting into stablecoins. Moreover, diversifying collateral is generally recommended when engaging in margin trading on Gemini to manage liquidation risk.
In summary, Gemini’s cross collateral enables multiple cryptocurrencies to jointly secure derivatives trades, expanding options beyond the traditional single-token margin and improving leverage flexibility while managing liquidation risk via haircuts and diversification. The value of the collateral pool on Gemini is determined by the current market value of the held digital assets, and with cross collateral, multiple digital assets can be used as collateral instead of just stablecoins like USDT.
- Gemini's cross collateral feature allows users to utilize a diversified portfolio of supported tokens, including Bitcoin (BTC), Ethereum (ETH), XRP, Shiba Inu (SHIB), Dogecoin (DOGE), Solana (SOL), Bitcoin Cash (BCH), and USDT, as collateral for derivatives trading.
- Starting July 24, traders can open and maintain leveraged derivatives positions on the Gemini crypto exchange using a collective pool of cryptocurrencies, rather than just stablecoins like USDT.
- The system applies collateral "haircuts" to assets with higher risk and volatility, such as XRP and SOL, to adjust their market value for margin calculations.
- This cross collateral system offers increased capital efficiency and flexibility, allowing traders to deploy idle altcoins in derivatives trading without selling or converting them into stablecoins.
- However, it's crucial for users to remember that if losses on derivatives positions exceed the collateral value, Gemini may liquidate the collateral, potentially resulting in full loss of the assets used.
