Do you want to trade cryptocurrencies but have a limited amount of capital to work with? What if we told you there was a way you could leverage your long and short positions on Bitcoin by 2X, 5X, 10X, or even 100X, without having to hold the capital required to open such positions? Welcome to crypto margin trading!
This article will be talking about the best margin trading platforms among the various platforms for crypto margin trading in the USA. We’ve also included a list of the best margin Bitcoin trading tips just for you!
What Is Bitcoin Margin Trading?
Considered to be one of the most profitable and riskiest trading strategies, margin trading (or Bitcoin margin as most people refer to it) allows you to trade with leverage by borrowing funds from the exchange.
- All you have to do to get started is sign up for one of the exchanges and activate your margin trading account.
- Next, you can apply for a loan on the platform and trade using the borrowed fund you receive.
For example, if you opened a Bitcoin margin trading account with a 2X leverage but the Bitcoin increased by 10%, your position will yield 20% profit because of the 2X leverage. With no leverage, it would have been only a 10% ROI.
Margin leverage can also be as high as 25X and more but with higher risks. The same position will now yield 250% (instead of 10% with no leverage).
Pros and Cons of Margin Trading Cryptocurrency
Every trading strategy has its advantages and disadvantages and the same goes for crypto margin trading. Here are its pros and cons:
- Margin trading allows you to make large amounts of profit in a short amount of time.
- Even if you have less capital, you can open big positions.
- You can make profits even if the market moves are small.
- Lets you keep fewer funds on a crypto exchange.
- Even though it allows you to make high profits, it comes with extremely high-risk
- You can lose all their investment very fast. When the market gets highly volatile, the trades are liquidated even before you can react.
- You have to have perfect timing to open up a position in a market.
- You have to leave the position when it’s profitable. Inexperienced traders are going to take heavy losses while leverage trading.
How Does Crypto Margin Trading Work?
It is important to note that the exchange itself does not pose a lot of risks because every position has its liquidation price, which depends on the level of leverage.
Crypto margin trading requires traders to borrow money to make larger trades. However, it is important to bear in mind what’s called liquidation prices. When the market arrives at liquidation prices, the exchange closes all positions automatically. It is done so that traders only lose the money they invested and not the funds lent to them.
For instance, the price of a Bitcoin is $10,000 and you want to do some Bitcoin margin trading. You’ve established a long position by buying 2x leverage, meaning you’ve borrowed an extra $10,000. Let’s say the liquidation price is slightly over $5,000. Once the market reaches this level, you’d lose all your investment and also your fees and interest.
Usually, if you buy $10,000 worth of Bitcoin, the value of the coin has to go to zero for you to lose your entire position. But with 2x leverage, you’ve doubled the chances of gains or losses.
Here’s how you do margin trading:
- Once you’ve activated your margin trading account and logged in, you’ll need to deposit some funds
- Next up, you can apply for a loan in BTC using your deposited funds as collateral
- You will be charged an interest every day, which updates frequently depending on the exchange
What Are the Fees Related to Crypto Margin Trading in the USA?
in the USA has two costs related to it. Here they are:
- Fees required to open a position
- Interest in borrowing coins
The interest rate also called the “funding rate” is peer-to-peer and relies on several factors such as the existing premium between futures and spot prices of an asset. The funding rate is calculated every hour.
Isolated Margin Trading and Cross Margin Trading
Before we get to the best crypto margin trading platforms of 2022, let’s quickly understand the concept of and difference between isolated margin trading and cross margin trading.
What Is Isolated Margin Trading?
An isolated margin allows you to limit the risks of a trade by restricting the amount of margin at each position. In this way, if your fund reaches liquidation price, then you lose the funds of that particular position only.
What Is Cross-Margin Trading?
When cross-margin trading, you share your entire asset balance across all the open positions in your margin account. It can prevent liquidation, as other positions can aid the position in loss. Cross-margin trading is most popular among professional traders and investors who are hedging existing positions.
Crypto Spot Trading versus Margin Trading
Before we jump to explore the best crypto trading margin platforms, let us also quickly understand what is crypto spot trading and how it is different from margin trading. Crypto spot trading, the most common and popular form of crypto trading, refers to the direct sale or purchase of a cryptocurrency.
So how is it different from margin trading?
|Crypto Spot Trading||Crypto Margin Trading|
|Crypto spot trading is the most basic form of crypto invetsment||Crypto margin trading is more of a form of trade, similar to performance speculation crypto assets|
|When spot trading, crypto is instantly exchange between active market participants who are selling and buying the coins||For a margin trade to begin, the trader or investor must offer collateral commitment, known as the margin|
|Soon as the buy and sellers mutually agree on a bid offer, the spot trade is completed, allowing the buyer instant ownership of the crypto. Even beginners can participate in spot trading as they can buy crypto with fiat currencies on exchanges and enter a position.||Bitcoin margin trading requires users to borrow funds from a third party, making this form of trading more suitable for advanced or intermediate market participants. The borrowed funds for spot trading are provided by other market traders in exchange for interest based on market demand for margin funds.|
5 Best Platform for Crypto Margin Trading in the USA
There are many options available in the market, and we have listed the 5 best platforms for crypto margin trading in the USA based on their features as follows:
1. Binance Margin Trading
Bitcoin margin trading at Binance is spot trading with borrowed funds and increased risks. Binance is one of the biggest crypto margin trading platforms in the USA and one of the best margin trading bitcoins in terms of volume. With Binance, you can reduce your trading fee by 25%.
Features Of Binance Margin Trading
- Isolated margin trading
- Cross margin trading
- No fees for depositing funds
- Margin level
- Maintenance margin
- Industry-leading security protocol
- Allows 1:3 margin trading with Bitcoin, Ethereum, XRP, etc.
Drawbacks of Binance Margin Trading
- Could be a little overwhelming for beginners
- All your margin orders go into the spot market
- Does not support most traditional payment methods
2. Bityard Margin Trading
Bityard, a Singapore-based exchange, is ranked as one of the best margin trading bitcoin platforms in the market. They operate with isolated margin trading, which helps you keep your entire fund safe even during liquidation. It provides its services in over 150 countries.
Features Of Bityard Margin Trading
- Isolated margin trading
- Customizable and easy-to-use interface
- Market competitive trading fee
- Own financial license in four countries
Bityard provides you with leverage services through isolated margin trading. As mentioned earlier, isolated margin trading allows you to use borrowed funds separately for each position, so you lose funds of only that particular position in case of liquidation.
Leverage At Bityard
Bityard provides you with a leverage of up to 125x on crypto trading margin and 200x on derivatives margin trading. You can adjust leverage from the leverage slider.
You’ll be charged a fixed price on margin trading at the time you open a position. To calculate the margin trading fee:
(Opening/ Closing fee = Margin * Leverage * 0.05%)
Drawbacks of Bityard Margin Trading
- Minimum trading amount of 5 USD
- OTC deposits available in a few countries
3. Kraken Margin Trading
Kraken, a US-based margin trading platform, provides its services in over 175 countries. It lets you magnify your trades by letting you use more complex trading strategies.
Features Of Kraken Margin Trading
- Among the safest crypto margin trading in the USA
- Charge low fees on leveraged trades
Trading At Kraken
You can open a position at a lower price and then close it at a higher price. This is referred to as going ‘long’. Whereas going ‘short’ implies opening a position at a higher price and closing it at a lower price. The former works with or without margin; however, the latter only works with margin trading.
Drawbacks Of Kraken Margin Trading
- Provides maximum leverage of only 5x
- Slow verification process
4. BitMEX Margin Trading
One of the best margin trading bitcoin platforms is BitMEX, based in Seychelles. They offer a fast and secure platform for crypto market traders. The platform provides BitMEX futures and swaps on its platform.
Features Of BitMEX Margin Trading
- High leverage and liquidity
- Reasonable fees for Bitcoin marginal trading
- Supports anonymity
- No fees on deposits or withdrawal
Isolated And Cross Margin Trading At BitMEX
Let’s assume you’re using an isolated margin trade and have 100 USDT in your BitMEX account. Let us suppose the price of BTC is 10,000 USD. Next, you open a position worth 5 USDT, and the exchange has a liquidation price of 9,500 USDT.
When the price falls to 9,000 USDT, all of your 5 USDT will undergo liquidation but there will be no deductions from your main balance. Now, if you’re using cross margin, then you’ll suffer a higher loss, but you wouldn’t have suffered liquidation.
Drawbacks of BitMEX
- Outdated user interface
- Exchange is alleged to be involved in illegal activities
5. Poloniex Margin Trading
Poloniex is a Seychelles-based Bitcoin margin trading platform that offers lending, spot trading, margin trading, and staking. As of March 2021, Poloniex was ranked 13th in crypto margin trading in the USA by dollar value volume as per CoinMarketCap.
Features Of Poloniex Margin Trading
- High liquidity
- No verification needed
- Chatbox feature
Trading On Poloniex
At Poloniex, your initial margin and maintenance margin levels determine your leverage, and you can get leverage up to 100X. It has a tier-based fee system, and you can also apply for the silver and gold tiers.
Drawbacks Of Poloniex Margin Trading
- Hacked in 2014 and lost 12% of user assets
- High lending interest rates
Is Crypto Margin Trading Safe? The Risks Of Bitcoin Margin Trading
Before placing a margin trade on any trading platform, make sure you’re aware that leveraged trading amplifies both profits and losses. When the crypto markets move in your favor, you’ll enjoy greater gains. On the other hand, however, you’ll also be prone to suffer large losses if the price moves in the opposite direction than your prediction. Thus, margin trading is not suitable for anyone new to crypto trading.
It must also be noted that as a margin trader, you’ll be required to hold a certain percentage of the value of your position on the exchange at all times for that position to remain open. In case you experience a loss on your position that exceeds a certain limit, known as the liquidation price, your order will be automatically closed.
Best Cryptocurrency/ Bitcoin Margin Trading Tips
1. Reconsider If You’re A New Trader
If you’re new to crypto trading or cryptocurrency as a whole, margin trading probably isn’t the right thing for you. It’s a high-risk approach that’s best suited to experienced traders.
2. Always Start With Small Amounts
First-day margin trading? Start small. Gain the necessary confidence you need before jumping into the deep raging water of leveraged trading.
3. Don’t go all-in at once
If you’re not sure about your trading skills, it’s better to divide your position into portions and create a ladder of prices. In this way, you can decrease the risk while averaging down the entry price of the position. The same applies to taking a profit- setting up a ladder of take-profit levels.
4. Highly volatile
Crypto trading can have extreme fluctuations that occur in both directions. The risk factor is that the depth will touch our liquidation value. It can happen where the leverage is relatively high, so the liquidation value is relatively close.
5. Risk Management
When you’re bitcoin margin trading, set clear rules of risk management and beware of excessive greed. When considering the amount you are willing to risk, remind yourself that it can be lost entirely. Set clear levels for closing positions, taking profit levels, and most importantly – setting up stop-loss levels.
Risk Management and Margin Trading Crypto in the USA
Margin trading is a risky endeavor and the risk increases with higher volatility and leverage used. The higher the risk, the more the chances of a trader being “blown out” of their position.
To manage risk, a majority of traders hedge their bets by opening opposing positions. It is a standard way to manage the risk involved in the investment. For instance, if you hold a lot of Bitcoin, it would be seen as a long position. One of the ways to hedge against the volatility of a downward price might be to place a leveraged short position. By doing this, the short position will rise if the price of Bitcoin falls, and the investors can recover some of their losses.
What is cryptocurrency shorting?
Shorting is another intriguing function of margin trading; you may recall Margot Robbie describing this in The Big Short or have heard of the GameStop shorting controversy. In essence, shorting is the practice of selling something at a premium and then buying it back at a discount. This pricing difference turns into a profit. Here is one to illustrate.
$1000 for 1 BTC is your admission fee. As a result of your use of 10x leverage, your margin is $100. You are betting against the value of Bitcoin by “shorting” it. If the price drops by -5%, you increase your profit by 50% ($50). If it decreases by -10%, you will profit by +100% ($100) of your margin.
However, you will begin to lose money if the trade goes against you and increases in price. If the price increases by 5%, your margin is reduced by -50%. Similar to previously, you must liquidate if your price increases too much and your margin matches your loss.
The benefits of leveraged trading are very clear, and another significant benefit comes from the security aspect. But even the best margin trading bitcoin platforms are a risk. If you’re new to cryptocurrency and crypto trading, and you’d like to margin trade cryptocurrency, start by doing plenty of research. Compare the fees and features as well as the pros and cons of various margin trading platforms to find the one best suits your needs.
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