What are the Best Exchanges for Crypto Margin Trading?

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Bitcoin (BTC) and other digital currencies can actually be leveraged multiple times on certain trading platforms. Let’s explore the best exchanges for crypto margin trading online.

Leveraged trading is commonly employed in the stock market. Simply put, a leveraged position allows a trader to deposit a small amount of capital to trade a much larger position. The trader effectively borrows money from the broker, to open a position substantially larger than the capital amount. The amount of capital that is deposited is known as the margin requirement. A 1% margin requirement indicates a 100 X leverage amount. A 10% margin requirement indicates a 10 X leverage amount. The lower the margin requirement, the greater the leverage power of the trade.

Note: Leverage is different to a loan in the sense that no interest is charged on the leveraged amount. However, the broker may require increased capital to keep a position open, before it gets closed out by a margin call. Leveraged trades, whether in indices, currencies, commodities, stocks, bonds, or even cryptocurrencies, can magnify profits or losses, depending on whether the trade finishes in the money or not.

Understanding Bitcoin (BTC) Margin Trading

Margin trading is entirely possible with Bitcoin (BTC), Bitcoin Cash (BCH), Litecoin (LTC), Ripple (XRP), and various other cryptocurrencies. With margin trading, crypto traders can take out long positions (bullish expectations), or short positions (bearish expectations) vis-a-vis the future price of cryptocurrency. This is made possible by brokers who advance funds to eligible traders over and above the available balance in the account. If the trader’s balance is depleted, the long or short position automatically close out.

Various cryptocurrency exchanges allow Bitcoin margin trading and CFD trading (Contracts for Difference) on these digital currency options. CFDs are derivatives trading instruments where traders do not actually take ownership of the underlying financial instrument – they simply trade contracts which mirror the price performance of these assets. For the crypto exchanges, risk is mitigated by way of liquidation prices on each of the open positions. In other words, if prices move too much and the trader doesn’t have enough capital to cover those price movements, the position will automatically close out.

Bitcoin (BTC) Margin Trading Exchanges

Futures trading has a forward perspective i.e. traders take up positions on the future price of the underlying asset. Cryptocurrencies remain ‘contrarian’ financial instruments, serving as viable alternatives to traditional investments in stocks, commodities, indices, and currencies. Yet, like the others, Bitcoins and cryptocurrencies can be traded with partial down payments known as margin when buying and selling these financial instruments. These deposits are made at the cryptocurrency exchange in question, for trading use underlying financial instrument.

Some of the best exchanges for crypto margin trading offer the widest possible variety of piers to choose from. Naturally, the preferred crypto exchange must offer the most competitive leverage to traders. It is important to pay attention to the features provided by various margin trading exchanges, such as the following:

  • Leverage amount
  • The user-interface
  • Design and layout
  • The registration process
  • Credibility of the exchange
  • Variety of crypto trading tools and resources
  • Availability of various cryptocurrency trading options
  • Professionalism and responsiveness of customer support

It is worth pointing out that the leverage amount alone is not the best measure of selecting a crypto exchange for shorting the Queen and other digital currencies. There are many other factors which come into play, and each of them must be assessed accordingly. A number of Bitcoin and cryptocurrency exchanges are highly regarded among traders. These include the top-ranked option, Binance Futures (leverage of up to 125X for the BTC/USDT pair), Huobi Futures (max margin 1000 X), and Bybit (max margin of 100 X).

It is incumbent upon traders to carefully read the terms and conditions of trading at each of these platforms, to assess the viability of each exchange in turn. Bitcoin margin trading is inherently risky, and it is strongly advised that traders begin with a small budget and gradually increase it over time. Given the extreme volatility of trading cryptocurrency and related financial instruments, it is important to keep your finger on the pulse at all times. It is worth reiterating that leverage can work for you when trades are moving in your favor, but they can also work against you if reversals take place.

Updated October 15, 2020

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