Crypto Margin Trading – Is it Profitable?

The traditional method of trading cryptos i.e. buy and sell digital currencies in an exchange using your own fund has been in place for some time. But Crypto Margin Trading has been a new concept that is picking its pace with more platforms/exchanges offering the trade and  traders keen to explore it.

The major difference between a margin trade and regular trade is that in former  the individual could borrow money from an exchange to boost his buying power and opening gates to higher gains/losses. On the other hand the regular trade an investor buys coins/tokens at the market price and holds it until the price shoots up, either over the long or short term to sell them for a profit.

While regular trade sounds like a simple concept with sure shot profit, margin trading is riskier and need lots of research and intelligence to gain profits. Are Crypto Margin Trades anytime profitable? Lets have a closer look –

Crypto Margin Trading – Is it Profitable?

Margin Trading is based on the power to leverage. While lenders play safe and lend you the money to trade, the traders/investors use that money to open positions in the market. Many investors consider it a double sword game as a trader need to pay the interest on the amount borrowed and also in case drop in the market, there is a risk of margin call.

However, with all this some experts love Margin Trading and earn profit as well. Here are few considerations an investor should bear in mind before approaching for a margin trade.

 

Availability of Margin for  Trading

The whole game is based on margin, and is directly proportional to your gains or losses. While the average leverage is about 3:1, other platforms and exchanges offer 2:1, 4:1, 5:1, 3:33:1 or even 1000:1. Lets pick an example –

So you are planning to buy $10,000 worth of Bitcoin

With borrowing 50% Or leveraging 2:1 or 2x

Then you would only need $5000 to purchase a bitcoin worth $10,000.

So while the purchasing power is 1/2  and deal seems profitable, consider when the prices fall and there is a risk of margin call.

Interest Rates Applied on the borrowed amount

Continuing with the same example above, if the amount $5000 that you borrowed has a very high interest rate then it wouldn’t sum up to be  a profitable trade, so choose a lender/exchange with nominal interest rates. In crypto margin trading the interest rates are calculated on daily basis, and with price fluctuating you need to top up your account to avoid lender from credit risk, in case market is going steep down. So make sure to account for the interest rates so as to know the amount exactly you need to pay back to the exchange.

Value of Crypto

The value of cryptos is different in each country and is never pegged to USD or any other fiat currency. However the price is still determined in a fiat used by a specific country. Just for example if you search Bitcoin price on Google, it might return in USD as it takes the price from Coinbase API that provides results in USD.

So in Crypto margin trading an investors profit/loss is calculated with respect to the underlying coin i.e usually Bitcoin. So if you are trading a pair of ETC/BTC, so the price movement is not only based on the coin you have invested in but also the price fluctuations of the crypto that it is based on.

 

References – Ambcrypto, Investopedia

Top Five Crypto Exchanges for Margin Trading

Cryptocurrency exchanges are the web portal that facilitates buying, selling and exchange of cryptocurrencies for other digital currencies or Fiat like USD or Euro. One of the trading strategy widely adopted by veteran traders is Margin Trading. If you are new to Margin Trading and keen to explore the pros and cons, please refer to our previous post. Margin Trading – Everything you need to know and Pros and Cons of Margin Trading.

Our post of today would explore the Cryptocurrency exchanges that allow Margin Trading. Let’s get started –

Top Five Crypto Exchanges for Margin Trading

The listing is based on Coin Market Cap, Top 100 Cryptocurrency Exchanges by Trade Volume. But here the list is exclusive of exchange’s that offer Margin Trading.

OKEx

OKex exchange offers crypto-to-crypto trading and fiat to crypto trading as well. The exchange also offers Margin Trading with a maximum of 20:1 leverage available. Due to the volatile nature, margin trading is limited to 20:1 in crypto markets.

In April, OKex announced adding seven new trading pairs for margin trading, which were –

  • BCH/USDT
  • LTC/USDT
  • ETH/USDT
  • ETC/USDT
  • ETC/BTC
  • IOST/BTC
  • QTUM/BTC

And, just last month in September they introduced EOS tokens on Margin, adding new pairs –

  • EOS/UDST
  • EOS/BTC

Talking about How Margin Trading works on OKex, an individual can buy tokens from OKex, executing positions with three times of his capital. While your potential gain is maximized, so would be your potential loss.

 

Huobi Pro

Huobi Pro, headquartered in Singapore is an international crypto trading exchange is known for its multi-language support and platform. To start trading on Huobi, you need to register with your email ID and submit the documents for KYC; the whole process may take a day or two. Once you have registered successfully, you can enjoy the Margin Trading feature that allows your trade several cryptocurrencies pairs. The platform offers leverage up to 5X in BTC and BCH, LTC, ETH, EOS, OMG, XRP are some of the pair available for BTC.

 

Hitbtc

HitBTC, an exchange based in Estonia has been into operation since 2013. On June 2, 2018, HitBTC launched Margin Trading. In their official blog

HitBTC is launching a dedicated service for margin trading in collaboration with our partner Weltrade.

With this service you will be able to use leverage 1:3, margin trade at HitBTC at any moment, open long or short positions and withdraw money in just 30 minutes 24/7.

To initiate trading, one could visit here, fill the form, open the account, fund it, download the platform and Start Trading.

Bibox

Bibox, an AI-based digital asset exchange that offers a secure, stable and credible exchange service for digital assets such as BTC, ETH,BIX,NEO, EOS. They added Margin Trading support in April 2018. In an official release on the web page they mentioned –

Bibox will open margin trading at 14:00 April 18 (Beijing time) and trading pairs ETH/USDT, BTC/USDT will be included; You can log on the web or PC client to operate, and the feature will be added to the app soon. More pairs will be listed gradually.

Bitfinex

Bitfinex, one of the oldest exchanges in the cryptosphere has been operational from Hing Kong since the year 2014 and serves countries like Bosnia and Herzegovina, Democratic People’s Republic of Korea (North Korea), Ethiopia, Iran, Iraq, Syria, Uganda, Vanuatu, and Yemen.

To get started you would need to register, verify your ID along with the KYC formalities. The whole process could take up to 15-20 days before you could think of login into the platform.

The platform allows an individual to margin trade and get leverage of up to 3.33x.

Our next post would talk about Crypto Margin Trading – is it profitable? Stay tuned.

References

Medium, OKEX Support, Hypes codes, hitbtc, bitcointradingsites, bibox, bibox

 

Pros and Cons of Crypto Margin Trading

In our last post, we narrated about What is Crypto Margin Trading and Costing of Margin Trade with examples. If you missed our previous post, please check here. In today’s post, we would discuss about Pros and Cons of Crypto Margin Trading.

Cryptocurrency Margin Trading is like availing Home Loan. Just as you can buy a Home worth 50,00,00 with 20% down payment[i.e., 10,00,00] and rest 80% as a loan, similarly in margin trading of cryptos, you can own Bitcoin or Altcoin worth $5000 with just $1000 capital with 5x leverage. The mechanism of holding high worth seems lucrative but has associated risks with it. Let’s take a closer look at the advantages and disadvantages of Crypto Margin Trading.

Pros of Crypto Margin Trading

Margin Trading concept was born in the US and is now accepted widely across the globe. Let’s look at the advantages of cryptocurrency Margin Trading –

Access to High Worth at less Price

One of the most straightforward advantages of margin trade is owning a high worth asset at a lesser price. With Margin Trading a trader could own a digital asset worth of $10,000  by paying $2000 [excludes fees] with 5x leverage.

Larger Gains

If the trader has studied the market proactively and made the right decision to invest in Margin trade, with an upward market trend he can attain profit. Just for example if you have a margin call trade for a digital asset worth $10,000 by paying $5000, if using the leverage of 2:1, you can double your gains.

Cons of Crypto Margin Trading

Every coin has a flip side, so if you thought Cryptocurrency margin trading would only lead to profit and gains, hold on. Margin trading comes with its own set of risk, let’s evaluate –

Borrowing Money To Margin Trade Comes at a price

As a trader, there is no harm in dreaming of owning $1000, $10,000 or even $50,000 worth of bitcoins. With Margin trade it is possible as well, but the initial capital [assuming leverage of 2x] you need to borrow from lenders, you would need to pay interest on that amount. Now, this interest varies from exchange to exchange. Hence when you are calculating your gains, make sure to put in the interest amount you need to pay from your pocket.

Losses Could Be Amplified

Just as we saw gains are multiplied, and a trader could double his profit. Similarly, if the investor has not evaluated all the factors of market risks and cryptocurrency risks, the losses could be augmented.

Risk of Margin Call

Each exchange makes it a mandate for traders to maintain a minimum account balance say for example 25% of the open position. So in cases where the market is sailing in the opposite direction against your predictions, even your balance would fall below the set margin requirement, either you need to add more funds to your account balance to avoid a margin call or else the account would be closed automatically.

To excel in the art of Margin Trading all you need is an in-depth knowledge of cryptocurrency markets and risk management. Margin Trading is a useful investment strategy if applied intelligently could lead to a bigger account balance.

Our next post would talk about different exchanges that allow Crypto Margin Trading. Stay Tuned.

If you liked our post, please follow us on twitter [@getnuo] to get latest updates and insights.

Poloniex to close Margin Trading for US customers, Delists AMP EXP and GNO Tokens.

After the recent acquisition of Poloniex by Goldman Sachs backed circle, the firm [Poloniex] announced that by year-end it would close access to margin trading for clients from the United States. Releasing the statement Poloniex explained explains that these changes are part of its ongoing commitment to ensure it “complies with regulatory requirements in every jurisdiction.”

Poloniex also mentioned about delisting of digital assets – AMP, EXP and GNO tokens.

Read more at finance magnates


Nuo is a decentralised and transparent crypto banking platform. It acts as a blockchain powered financial control centre to store, spend, borrow and grow your crypto-currencies. Install the android app or try out our crypto backed loans platform.

If you liked our post, please follow us on twitter [@getnuo] to get latest updates and insights.

Expo, offers traders shorting Ethereum, with Margin Trading

Expo offers traders to practice shorting Ethereum with a mechanism of Margin Trading. An open source platform powered by dYdX protocol has launched the trustless method of creating short and leveraged positions for Ethereum.

Expo functions as a “Short Ethereum” token, which is pegged to a short position on Ethereum. The Short Ethereum token is powered by the dYdX protocol, which, in turn, is built upon the 0x and Ethereum projects.

Liquidity is infused in the Expo system by dYdX lending partners, who can earn interest by securing collateral into smart contracts that could also provide backing for ETH loans. The collateral is automatically sourced from decentralized exchanges. The Expo platform is planning to launch some other margin trading tokens including leveraged tokens

Read more at cryptoslate.com

Kraken Lists new cryptos ADA and QTUM, Margin Trading, in future

Popular bitcoin and cryptocurrency exchange Kraken, announced today the listing of two new cryptocurrencies, with ADA and QTUM. Trading and funding in the two assets will launch simultaneously.

While Cardano claims to have the world’s first provably secure proof-of-stake consensus mechanism. Quantum runs an “intercompatible” version of EVM (called the “X86 Virtual Machine”) that allows smart contracts to be written in multiple languages.

Users will be able to trade ADA and QTUM on both Kraken.com and its more advanced platform at trade.kraken.com. Margin trading will not be available at launch for ADA or QTUM but may be enabled in the future.

Read more at cryptoninjas.


Nuo is a decentralised and transparent crypto banking platform. It acts as a blockchain powered financial control centre to store, spend, borrow and grow your crypto-currencies. Install the android app or try out our crypto backed loans platform.

If you liked our post, please follow us on twitter [@getnuo] to get latest updates and insights.

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