Lend and Borrow Cryptocurrency
OKEx one of the most trusted digital asset exchange on Tuesday i.e. 06 Nov introduced new margin trading pairs XRP/BTC & LTC/BTC for their valuable customers. As per the official announcement made on their website and twitter account –
To meet the public demand , we will open the margin trading pairs XRP/BTC、LTC/BTC from 15:00 Nov 6, 2018 (HKT).
They also reiterated that margin trading involves risks and hence need to carefully evaluated before making investments.
Read more here okex support
Trading on Margin, is it good or bad? Under what condition would it be considered as good? When market is at its peak or there is a dip? That’s the dilemma faced by many traders and investors who want to sail in the world of Margin, but is it good or bad? Let’s explore about the good and the bad of crypto margin trading in today’s post –
An individual borrows capital from the lender so as to invest and buy more assets/cryptos. The individual gets leverage, where he is [based on his analysis and intelligence] making a bet that his returns on the investments made on margin are going to be higher than the interest he needs to pay his lender, excluding fees for now. Point to note that the lender uses your cryptos in your crypto wallet as collateral so as to satisfy your margin. So margin could also be termed as debt.
In need of some urgent capital? Then considering market sentiments, it could be a good idea to invest in Margin Trading. Borrowing capital at this stage based on your analysis may turn towards profit, start investing and in a few days once you make a profit you can cover your margin.
There is this dream project you want to start off, or the market is just going as per your predictions and based on your analysis you feel investing more for higher returns, but not enough of it? Then Margin could help you in borrowing that money and reinvesting to get positive returns. Go ahead and use margin to start your position.
Although crypto margin trading is available for only selected cryptos, still it is wise to know which ones are the best to help you earn a positive ROI.
Do not open Margin to use that capital in any other form of debt, that’s the riskiest venture. Take it this way you are already paying a margin interest on the borrowed amount, using it to get another debt is again starting a new cycle of interest payments and because you wouldn’t be earning any returns on your second investment in case your margin trade results in a loss, it means no capital to pay interest of second debt as well.
What are your stories of Good and bad in crypto margin trading? Would love to know them. Please share your feedback with us @getnuo , our twitter handle.
References
Japan’s regulators are considering stricter limits on margin trading of digital currency as reported by Nikkei. To curb speculative trading and limit user exposure to volatility risks, Japan’s Financial Services Agency is considering leverage caps for margin trading of cryptocurrencies.
The push to regulate came in response to concerns by many users. With a theft with Coincheck early this year FSA received a lot of inquiries, and this move is just to reduce risks and improve user protection.
Read more at Asia.nikkei.
Crypto Wallets are the essential part of crypto margin trading. These crypto wallets are provided by the crypto exchanges are used for trading leveraged short and long positions and for providing margin funding/financing to other traders. The funds are instantly transferred from one wallet to another assisting is a smooth trade. So what else does the crypto wallet help with, the Margin Traders? Let’s explore about Crypto Wallets and their place in Crypto Margin Trading
A cryptocurrency wallet or Crypto wallets is a software program that stores the public and private keys, interacting with different blockchain to allow individuals to send and receive digital currency and view their balance. If you are keen to use any digital currency, one of the prerequisites is to have a crypto wallet or digital wallet.
The working of cryptocurrency wallet cannot be compared to a physical wallet. The crypto wallets do not store currency, unlike the wallet you carry in your pocket. When an individual sends a digital currency to say ETH, he is actually signing off his ownership from that coin and assigning new ownership address of yours. To access these coins and spend it or use it for crypto trading the private key that is assigned to you should match the public key available for ETH. Once the match is made, the account balance would increase and that for the sender would decrease. There is no real exchange of coins, only a transaction record on the Ethereum blockchain and a change in account balance of the sender and receiver.
In the market, many types of crypto wallets available are categorized as Software[subtype – Desktop, mobile and online], Hardware, Paper wallets. Each of them differs in a way they are accessed and utilized.
But the most crucial categorization of wallets for margin traders is Hot wallets and Cold storage. This could be applied to any crypto wallet. Both of the strategies are a measure of tightening the security by exchanges to safeguard funds from hackers. Both cold storage and the hot wallet are security measures put in place by exchange platforms to safeguard user funds from any mishap.
Cold storage wallets are wallets that are offline most of the time and can be accessed only when the user wants to make a transaction, putting away the risk of being hacked. Example of a Cold storage wallet would be Hardware wallet that is accessed via USB drive and can be put on offline mode easily. Crypto Margin Traders could use this Cold storage when making a margin trade. It not only helps the funder/lender but even the trader to put his collateral in a secure way.
Hot Wallets, on the other hand, refer to “liquidity in hand” by exchanges in case there is a sudden request of withdrawals. Just imagine a bank in your neighborhood keeping “cash handy” for withdrawals. Example of hot wallets would be an online wallet or desktop wallet. So for Margin trading in case, a margin call is made, and the borrower is not able to fulfil or top-up his wallet, the exchange would release the collateral from the hot wallet to the lender.
While the experts recommend usage of Cold Storage, hot wallets are still to be used whenever the need arises. Would you like to share your crypto wallet story with us? Please post on to our twitter account
References
Most of the crypto Traders look for passive income owing to the nature of the market. The market shifts are so random and quick that an investor could lose all his money if he did not act on time, that’s where Trading bots come handy and have been evolving in functionality and sophistication. Our post of today would talk about the trading bots and their role in Crypto Margin Trading. Let’s get started –
Just as Algorithmic Trading is used by the buy-side in equity, currency or commodity markets, Trading bots that first appeared in FX or foreign exchange market, are now making their way into the cryptosphere.
A Trading Bot is nothing but a piece of code or software or a computer program that takes various indicators as inputs, analyzes the trends and market sentiments, and automatically executes your orders. Bots are a unique form of Artificial Intelligence or AI that answers your queries, shares information, perform actions and you may even not now it’s a computer program.
Bots are designed to improve over time, based on their past decisions and results they have the intelligence to refine themselves and provide precise answers/appropriate action.
One of the primary advantages of Bots is the reason for their evolution. They came into existence to make quick and precise decisions. We all are well aware of the fact that crypto world never sleeps and even a light rain shower could move the candlestick up or down, so irrespective of whether the trader is active or passive he needs to be watchful and be alert and active 24*7 is humanly impossible, then why not ask a piece of code to work for us.
Bots are the “trader” that knows the necessary data, patterns and exactly when to trade — and when not to.
While Trading Bots help you to analyze patterns and get insights to indicators, they do not help you to choose trades. Which trade to pick is something you as an experienced trader need to learn yourself. So, it comes with a risk of what if you chose a wrong trade and the bot would only take it a step further may be towards gain or loss.
Another disadvantage that is associated with Trading bots is given the nature of the market; the program is yet not mature to know all the combination and probabilities of an event happening and make a decision that shows a gain. The technology is evolving, and so they need to have a working knowledge of how the market works to make the right decisions.
There are many Trading bots available on crypto traders to assist with Crypto Margin Trading, and each has their own distinctive features. Listing down few of them based on the popularity [ Please use these strategies at your own risk]
A premium strategy can be used at Bitfinex and Poloniex follows early trends rather than predicting the future. The bot will buy when the market is gaining momentum and sell when it’s dropping. You can know about its features and uses here.
Another premium strategy that can be used at Kraken, Bitfinex, and Poloniex is a trend bot that has built-in safe scalping. For the novice, it can be run on default settings with minimal effort. The strategies have been tuned across many coins and exchanges. You can know about its features and uses here.
While the Trading Bots sound like an effective trading strategy, it is challenging to gauge their actual performance, and no bot provider would ever provide this. In Arbitrage trading, these bots could be quite useful and have a distinct advantage as they can quickly learn about the slightest price movement and make a decision and keep scanning for such price differences across geographies. However, as the strategy gets complicated and affected by more inputs, it gets tough to rely on a computer program entirely. So, make sure to trade cautiously and be fully aware of the actions performed.