Initially born as something inaccessible to ordinary traders and more a product for “geeks,” cryptocurrency trading has, in just a few years, gone through a path that took several decades for traditional stock trading to master. Recently, market participants gained access to a new tool — margin trading in cryptocurrencies. Let’s explain this in simple words.
More money, more possibilities
Over time, cryptocurrency prices become increasingly less volatile, prompting traders to seek new ways to generate regular profit during daily trading. The most acceptable methods among existing options are margin operations. The term and principles of margin systems were borrowed from stock trading. It’s a way to increase your capital without attracting additional personal funds. That is, a certain amount of capital is provided by other members of the exchange, whom the trader chooses as lenders. Currently, many cryptocurrency platforms offer their participants credit conditions.
Let’s consider how this works with an example. Suppose you have $100 in your account. You believe in your skills and want to trade with a 1:10 leverage ratio. With the same amount of personal funds, you can obtain additional funds. With this leverage, your account will have $1,000. You can buy many more lots of assets, or develop more complex trading strategies, or hedge your risks by opening positions in opposite assets. An incorrect prediction of the market direction on one position can be compensated by an opposite trend on another.
In other words, if you correctly predict the trend, you can earn 10 times more profit. And this is with a 1:10 leverage. Many modern exchanges offer leverage up to 125. It’s important to remember that losses from incorrect strategies are also proportional to the leverage.
Exchanges with margin trading
Different exchanges offer various conditions for margin lending. Let’s review the most interesting companies in detail and in an accessible way so even beginners can understand what margin means in crypto trading.
BitMEX
Considered one of the most convenient platforms for stock trading. Simple margin calculation rules and advanced algorithms provide excellent earning opportunities. Besides perpetual instruments, traders can also trade futures contracts.
Eight cryptocurrencies are available for margin trading. The most popular are Bitcoin, Ethereum, Litecoin, with limits up to 100x, 50x, and 33x, respectively. The lowest levels are for Ripple, EOS, and TRON, with a margin multiplier limited to 20x.
Registration instructions are available at this link.
ByBit
Leverage here cannot exceed 100. The platform offers risk management options, which can save the account from depletion in case of adverse market movements.
Go to the official Baybit website
Prime XBT
Historically focused on margin trading. Limit up to 1:100. All contracts are currency pairs relative to the US dollar. The main cryptocurrencies used can be BTC, EOS, LTC, ETH, XRP.
The specified credit remains unchanged and can only be reduced automatically when trading large lots.
Currency
Maximum leverage is 1:500, depending on the market where the trader operates. The required margin is specified when opening each position.
BitMax
Besides Americans, all traders have access to leverage up to 100. Crypto margin trading is conducted through a dedicated account for such purposes. Traders can have a separate account for their own funds and accounts with credit.
The platform also uses a collateral system. Funds from the main account act as collateral for margin trades. In adverse scenarios, it’s impossible to lose more than the available funds.
Gate
In addition to standard trading, margin accounts can be used to buy offered assets with leverage. The maximum credit volume is limited to 1:3. The borrowed funds must be repaid within 10 to 30 days; otherwise, the main assets will be blocked.
Deribit
Allows margin trading for ETH/USD with a limit of up to 50x. Also offers perpetual futures and exchange options. The base currency for any account can only be Bitcoin — BTC. It is one of the few platforms where traders can easily work on strong trending movements.
HTX (ex.Huobi)
An exchange with a relatively long history. Offers several currency pairs with limits up to 5x for Bitcoin.
Bitfinex
Margin trading is conducted separately from the main account; you cannot get more than a 3.3x leverage. Those wishing to use margin can either arrange the loan parameters themselves or trust the system to find the best conditions. Registration details are available here.
Poloniex
Another “dinosaur” in the crypto exchange segment. With leverage up to 2.5, you can trade 17 cryptocurrencies, including Bitcoin, Ethereum, Litecoin, ETC.
Criteria for choosing an exchange for margin trading
The above-listed are among the most popular exchanges; the full list includes many more names. It’s crucial to remember the increased risks involved in margin trading in cryptocurrencies. You must not only make profitable trades but also return borrowed funds on time, paying the interest specified when opening the contract.
Therefore, the main factors to consider are:
- Liquidity. The higher it is, the faster and easier it is for traders to close positions. This is especially important during strong downward movements. The most reliable option is to work with the platforms listed above, which always have sufficient liquidity levels.
- Security during transactions. To trade safely with leverage, it’s necessary to protect your account with two-factor authentication.
- Range of trading instruments. The asset selected for margin trading should be understandable to the trader.
- Acceptable commissions. In the crypto sphere, costs above 0.2% of the total trade amount are considered high.
- Convenient deposit and withdrawal methods. During high volatility, they help quickly increase profitable positions and provide liquidity for losing positions to weather negative fluctuations.
Choosing the exchange in Russia for trading, especially with margin trading, must be done carefully and meticulously. It is one of the fundamental factors for both beginners and professionals. Many platforms offer a convenient calculator to precisely assess all financial risks associated with margin trading.
