On August 22, an announcement was made by the cryptocurrency exchange Kraken that Cardano (ADA) would now be supported as a collateral cryptocurrency on its futures platform. Additionally, it is compatible with cryptocurrencies like Polkadot (DOT), Chainlink (LINK), and Decentraland (MANA), amongst others.
It is now possible to leverage the native token of one of the most prominent proof-of-stake systems as a means of gaining exposure to hundreds of cryptocurrency futures contracts. Kraken provides clients with both single-collateral and multi-collateral futures trading options. The first kind of futures contracts only allows customers to utilise the base cryptocurrency of a particular pair as collateral, as the name of this type of futures contract could suggest.
The second form, on the other hand, allows traders to deposit any number of cryptocurrencies as collateral, which means that they are not limited to the base currency. It is important to be aware that the value of the collateral underlying ADA tokens is subject to a 10% “haircut,” which is a reduction in value. If a person has a balance of 1,000 ADA tokens, for example, 900 of those ADA tokens will count toward as collateral that may be used for supporting orders.
The percentage of the initial investment that will be lost due to the haircut varies depending on the cryptocurrency, ranging from 0% for Bitcoin (BTC) to 50% for Avalanche (AVAX) and Tezos (XTZ). It is important to note that users are not permitted to withdraw their collateral currencies while their spot trades on margin are still active.
Kraken completed the acquisition of the futures trading company Crypto Facilities in February 2019, for an amount of money that was not revealed. The subsidiary was awarded a licence to operate in the United Kingdom in July of 2020. After being accused of selling unlawful margined cryptocurrency transaction services, it settled the matter with the Commodity Futures Trading Commission (CFTC) in 2021 by paying a fine of 1.25 million dollars.