GuShiio.com Binance announced that it will launch a “daily limit mechanism” test in pre-market trading in Launchpool. This test targets RedStone (RED) tokens. However, whether this mechanism will become a long-term function remains uncertain.
Author: Weilin, PANews
On February 25, Binance announced that it would launch a daily limit mechanism test in Pre-market trading in Launchpool. This test is for RedStone (RED) tokens. RedStone (RED) is Binance Launchpool’s 64th project, a multi-chain oracle that spans EVM and non-EVM chains. In this pre-market trading rule, Binance stated that in order to promote innovation and improve user trading experience, it has launched the Price Cap Mechanism. However, this mechanism is only tested at the time of issuance of RED tokens, and whether it will become a long-term feature remains uncertain.
Following the Bitcoin plunge on March 12, 2020, Huobi subsequently introduced some clearing and circuit breaker mechanisms. However, these measures have not been widely adopted by exchanges. Zhao Changpeng, former CEO of Binance, also said at the time that it was impossible to set up a circuit breaker mechanism (in the cryptocurrency market). He believed that this could only be implemented in a completely monopolized market and could not be operated in a free market. This time, many encryption users expressed different views on the new mechanism.
Binance tests the pre-market trading limit mechanism, testing the water for the first time with RED token
According to the Binance announcement, users can put BNB, FDUSD and USDC into the RED reward pool on the Launchpool website starting from 08:00 on February 26 (East Eighth District Time). The event lasts for 2 days. Binance pre-market trading will be listed on RedStone (RED) at 18:00 on February 28 (East Eighth District Time), and the RED/USDT trading market will be opened.
In order to drive innovation and improve the user’s trading experience, Binance has launched a new function of the Binance pre-market trading market, a daily limit mechanism. The mechanism will limit the maximum trading price in the first 72 hours of the pre-market market, and the token price will not increase by more than a certain percentage of the initial opening price. 72 hours after the pre-market market opens, there will be no price restrictions and trading will return to normal.
According to the reminder, this daily limit mechanism will only be tested when RED tokens are issued, and it is unclear whether this function will become a long-term feature of the pre-market market in the future.
According to pre-market trading rules, the maximum personal position limit is 5000 RED. The specific daily limit rules are as follows:
February 28, 2025 18:00 -March 1, 2025 17:59 (East Eighth District Time): The maximum price available for order is 200% of the opening price
March 01, 2025 18:00 -March 02, 2025 17:59 (East Eighth District Time): The maximum order price is 300% of the opening price
March 02, 2025 18:00 -March 03, 2025 17:59 (East Eighth District Time): The maximum price that can be placed is 400% of the opening price
After 18:00 on March 3, 2025 (East Eighth District Time): No price limit
In addition, RedStone (RED), total/maximum supply of tokens: 1 billion REDs, total Launchpool: 40 million REDs (4% of the maximum supply of tokens) Initial circulation: 280 million REDs (28.00% of the total supply of tokens).
Individual hourly rewards for hard tops are as follows,
BNB Mining Pool: 66,666 RED
FDUSD mining pool: 8,333 RED
USDC Mining Pool: 8,333 RED.
Is the daily limit mechanism applicable to encryption in response to the sharp rise and fall of the new currency?
Binance’s so-called daily limit mechanism can actually be regarded as a circuit breaker mechanism, but Binance has not yet clarified when to stop trading. This mechanism originally came from the traditional financial market and refers to the suspension of trading measures taken by the exchange to control risks when the volatility of the stock index reaches the specified fuse point. Take the New York Stock Exchange as an example. The New York Stock Exchange has implemented three circuit breaker thresholds to measure the decline of the S & P 500 index from the previous trading day’s closing price of 7%(tier 1), 13%(tier 2) and 20%(tier 3). When the first two thresholds are reached, trading will be suspended for 15 minutes. Under the three-level threshold, transactions will stop.
Proponents believe that the circuit breaker mechanism can help stabilize market sentiment and prevent investors from overreacting. The daily limit mechanism of Binance’s test this time aims to prevent sharp rises and falls when the new currency is listed, thereby reducing extreme fluctuations and avoiding price surges due to speculation or manipulation. This mechanism aims to make pre-market trading more controllable and predictable, and provide enough time for the market to digest information and avoid violent fluctuations after the opening.
However, opposed users believe that this mechanism may violate the decentralization concept advocated by cryptocurrencies. The encryption market is highly volatile, and setting the fuse point itself is challenging. Some users have considered whether a circuit breaker mechanism can be added to the algorithm and design of the currency. However, given the overall free-market fundamentalist attitude of the cryptocurrency industry, these ideas are probably unrealistic.
In addition, the crypto market is open 24 hours a day and there are multiple trading platforms. If a certain platform announces the implementation of a circuit breaker mechanism, it may lead to an increase in price differences between different platforms, thus triggering arbitrage behavior. Cryptographic user@ChequerCat666 pointed out: It is useless unless Binance is the only one on the entire network, including DEX (decentralized exchange).& rdquo; However, supporting users believe that it is possible to form an alliance mechanism similar to the international oil price OPEC to jointly design and operate a circuit breaker mechanism.
User MetaseDrug @ MetaseDrug said that this time Binance’s new mechanism may deviate from its original intention: the original intention may be to prevent project Christmas trees, but now that it appears in this market situation, well, don’t be afraid of being short.” rdquo; Macroeconomics and Crypto KOL Bai Ding@Geight16 believes that such a rule is unreasonable that only a rise is blown and no fall is blown.
At the same time, KOL DeFi Miner@DeFi8362 stated on the X platform that the effective period of this price limit mechanism is too long: it depends on how Binance sets the opening price, and if it sets it low. There has been a 400% increase for three days, and the market has been directly closed. If it is high, this rule seems to be of no use, and it feels like it will be the former. The first time I came into contact with the circuit breaker mechanism was when Huobi was newly launched. However, the blow time is very short, should be ten minutes, which still has some effect and can reduce unnecessary fluctuations after the opening. It can also allow retail investors to think about the currency price relatively rationally. But three days is a bit too long.& rdquo;
3 12 After Bitcoin plummeted, Huobi launched a circuit breaker mechanism. What was the effect?
As mentioned above, on March 12, 2020, Bitcoin prices experienced a price black swan plunge. Between March 12 and 13, bitcoin prices fell more than 50%, and then rebounded. During the crash, BitMEX liquidations exceeded $500 million in an hour. The platform also experienced downtime, which BitMEX blamed on DDoS attacks.
However, the effect of BitMEX’s suspension of trading during the outage period is very similar to the stock market’s circuit breaker mechanism, especially when investors are most panicked, and trading is suspended for dozens of minutes. This also aroused the emotion of many people in the industry that BitMEX plays a role in circuit breaker to some extent.
Huobi DM (Huobi Derivatives Market), Huobi’s cryptocurrency derivatives trading platform, subsequently announced the launch of a new clearing mechanism that provides partial clearing functions rather than one-time clearing. Through this mechanism, the system will determine the margin ratio based on the calculated user exposure and automatically liquidate the user’s positions in stages until the margin ratio is greater than zero.
Huobi DM explained: With the new mechanism, the system will automatically start to gradually clear users ‘positions in stages. The clearing process also includes a circuit breaker function, which will stop clearing when a large difference between the clearing price and the market price is detected. rdquo;
However, the relevant person in charge of the Huobi contract also clarified on the Twitter platform that this is different from the circuit breaker mechanism in the traditional market, and liquidation will not stop trading.
Tushar Jain, managing partner of cryptocurrency investment fund Multicoin Capital, said at the time that for the cryptocurrency industry, the circuit breaker mechanism seems to be helpful, and the price trend of the cryptocurrency market proves that the entire cryptocurrency industry needs to establish a circuit breaker mechanism. The structure of the crypto market has collapsed, and leading exchanges need to work together to prevent a repeat of the same mistakes.
However, Zhao Changpeng, former CEO of Binance, also said in March of the same year that the circuit breaker mechanism can only be used on completely monopolized exchanges. Bitcoin trading is a free market and can be traded on several exchanges, which does not work at all. Don’t forget that there are decentralized exchanges, and who says 7% is the right number, why not 1% or 70%? rdquo;
Huobi’s circuit breaker mechanism was not widely adopted by crypto exchanges later. This time, Binance will further explore this direction with the trading mechanism it tested for the first time. What market effect will it bring? Subsequent developments deserve further attention.
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