The cryptocurrency exchange Gemini, operated by the Winklevoss twins, has announced the addition of new assets for cross-collateralization in its derivatives market.
New Cryptocurrencies in the Cross-Collateral Pool
Gemini has expanded the list of cryptocurrencies that can be used as collateral. Now available are assets like XRP, Shiba Inu (SHIB), Dogecoin (DOGE), Solana (SOL), and Bitcoin Cash (BCH). Previously, the platform accepted only Bitcoin (BTC) as collateral, but the new update allows users to integrate a wider range of cryptocurrencies for forming credit positions.
Benefits of Using Cross-Collateral
The integration of new cryptocurrencies increases the flexibility of collateral use, allowing investors to effectively utilize idle cryptocurrencies for generating additional capital. On the platform, users can create collateral from various assets, promoting deeper market activity and growth in the user base. For instance, an investor can create a collateral value of approximately $440 by combining DOGE, SOL, and XRP.
Risks and Recommendations for Investors
Despite the advantages, cross-collateralization also carries high risks, especially when using leverage. Price declines in cryptocurrencies can lead to rapid liquidation of collateral assets. An example is the incident when XRP's value dropped by 10% in a single day on July 24. Gemini advises users to diversify their collateral and use low leverage to mitigate risks.
The expansion of cross-collateralization options on the Gemini platform reflects the company's aim to adapt to the market and enhance the services offered. However, users should exercise caution and consider the risks associated with leverage.
