Despite the recent no-go for a Bitcoin ETF on Wall Street, the financialization of the crypto-currency continues as Coinbase, a popular Bitcoin exchange, is now introducing margin trading for investors of the digital money.
GDAX, the cryptocurrency exchange run by Coinbase, has added margin trading to the platform.
Eligible traders can now trade up to 3X leveraged orders on Bitcoin, Ethereum and Litecoin order books.
If you’re unfamiliar with trading and exchanges, margin trading is when you borrow money from your broker to buy or sell more stock than you can afford. It’s essentially a short-term loan. By buying or selling on margin, traders can increase their leverage and buying power, potentially generating profits beyond what their own cash balance would have supported.
This feature is mainly geared toward institutional investors. That’s because Coinbase has launched the feature attempting to fit within the boundaries of the Commodity Exchange Act. - Tech Crunch
This has always been the biggest fear for Bitcoin purists... that a government or financial market would co-opt digital currencies and make their underlying potential null and void as a 'decentralized form of money'. And it has always been the actions of third party conduits, such as with crypto-currency exchanges, that have placed digital forms of money like Bitcoin in jeopardy of simply becoming another leveraged asset that Wall Street can profit off of to the detriment of the holders.