Margin trading is a type of investing which gives individuals a chance to increase their investment by adding leverage to it. This practice lets you borrow someone else’s cryptocurrency and invest it as you see fit.
Margin trades are usually made by investors who are certain that the market will move in one or the other direction in the near future. You’re basically accepting the added risk of betting loaned money because you feel that the odds are that your bet will pay out.
So, for example, you have $100 worth of Bitcoin and you are certain the market price will go up through the upcoming days. Let’s say that you are so certain that this rise in price will happen that you want to invest more than you are currently holding.
You can borrow additional $100 percent from the market to invest a total of $200 in your “long” position (also known as the buy position, a market position investors take when they expect the price to go up). With this, you have now made a leverage trade of 2:1.
Your loan of $100 worth of BTC will eventually have to be repaid; once the loan amortization period expires, the person who loaned you the money will have received its $100 along with a pre-arranged interest.
In order to make sure that the loaning party receives his money back, the platform can margin call your trade if its total value falls beneath a certain threshold (one that would lead to you losing borrowed money). In this case, if your investment’s value were to fall beneath $100, you’d end up margin called and your trade would be liquidated.
To avoid going into too much detail (check out this link for a more in-depth look into the practice), margin trading has been a mainstay of traditional investing for quite some time and has successfully made the transition into crypto markets as well.
Leveraging someone else’s capital against a highly likely market outcome can be an extremely efficient way of multiplying your own holdings, especially when you go for higher margins like 4x, 5x, 8x or even 100x (the highest margin currently allowed on existing trading platforms).
Modern crypto landscape is definitely a good place to learn about and master margin trading. Constant crypto volatility requires savvy market observers to predict future price movements and margin trading exchanges are a perfect playground for them to cash in on their skills.
As a significant portion of these savants will want to test out their skills on the mentioned playground, we’ll give them a solid and list out some of the top margin trading exchanges in the market.
Top Cryptocurrency & Bitcoin Margin Trading Exchanges
BitMEX is one of the most popular platforms allowing its traders to leverage their positions. Co-founded and ran by the charismatic Arthur Hayes who achieved somewhat of a meme-like status in the community due to his unrelenting smile which beamed at us even as Bitcoin tumbled down from its 2017 all-time-highs, the exchange has offered margin trading services since 2014.
This platform is not a beginner-friendly exchange – some knowledge of traditional futures and options will be required before you can start safely using the trading environment.
BitMEX offers a whole host of different contracts, including traditional futures (for Bitcoin, Bitcoin Cash, Cardano, EOS, Ethereum, Litecoin, Ripple, and Tron), perpetual contracts (Bitcoin and Ethereum), and BitMEX upside/downside contracts for Bitcoin. It accepts only Bitcoin deposits and offers a maximum leverage of 100x. While never hacked so far, the exchange has somewhat of a negative history of going down “for maintenance” just before/after strong Bitcoin movements.
The exchange also seems to have a real problem with bugs and trading interface freezes that can cost you money. Is that Arthur nicking your money with a characteristic maniacal smile on his face or just a coincidence?
We’ll probably never find out. Overall BitMEX remains by far the market’s leading margin trading platform in terms of volume that will satisfy the needs of most advanced users looking to trade crypto with leverage. That is if they manage to avoid the infamous “order submission error”.
Read our full review of BitMex platform here.
Deribit became somewhat popular as the “BitMEX killer” after a slew of Twitter traders started shilling it online as the next best margin trading exchange. That’s not to say that the exchange lacks in quality; it’s been around since 2016 and hasn’t experienced any hacks or major issues since.
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The exchange allows you deposit BTC and use it as margin to trade BTC/USD price action on whatever leverage you choose. Overall, the traders seem to be pleased with the platform as it offers increased speed/performance when compared to BitMEX. Deribit order creation, trade execution, matching, margining all is lightning fast even in times of high volatility, unlike its bigger, laggier, less responsive competitor.
Maximum leverage you can go for on this platform is 100x, with a required minimum contract size of $10. It has a testnet which lets you try out your bots and strategies, as well as a subaccount feature to isolate your margin positions. All that being said, Deribit has a lot less liquidity than BitMEX. Deribit is also not open to traders from particular regions such the United States, Canada or the Netherlands due to regulatory issues. Check out this guide to find out more about Deribit margin trading.
Here is a full Deribit review.
This is a well-established Israeli social trading broker, one that operated on various financial markets since 2007. The platform recently introduced cryptocurrency trading and is constantly expanding the amount of instruments and currencies on offer.
Mostly focused on the copy/social trading feature, eToro does have margin trading features as well.
You can apply leverage on stocks, currencies, ETFs, commodities and indices, and cryptocurrencies. On eToro, each instrument has its own leverage minimum and maximum, so you’ll have to individually choose a leverage level which is right for you.
Current leverage for cryptocurrencies is 2x.
These ranges will also depend on the type of account you have on the platform.
The exchange also offers features like stop loss, take profit and negative balance protection which you can use to minimize trading risk. Additionally, this platform offers a social trading feature which lets users copy successful traders.
Binance is the world’s leading cryptocurrency exchange when it comes to innovation and daily trading volume. For almost two years, Binance was spot trading only but in 2019, they added the margin trading to their platform.
In order to use the Binance margin trading, you are required go through a complete identity verification (KYC).
Depending on the pairing, leverages on Binance vary and can go as high as 125x on some pairs.
Read our comprehensive guide on best cryptocurrency exchanges.
Interest fee on borrowed coins varies depending on your account level and type of coin you borrowed. Bitcoin has the lowest daily interest rate of 0.0075%, followed by ETH at 0.01% and XRP with 0.02%. Trading fees are fixed at 0.02% with a 25% discount if you use BNB.
Read our complete review of Binance platform.
Bybit is a crypto exchange located in the British Virgin Islands. It is a cryptocurrency derivatives platform with only two trading pairs: BTC/USD, XRP/USD, EOS/USD and ETH/USD.
At Bybit, takers are charged 0.075% per order while the makers fee is -0.025%, essentially all the same like BitMex. This essentially means that each maker get paid to trade. For example let’s say that you are the maker in an order where you purchase cryptocurrency for USD 1,000. This means that instead of paying USD 1,000, you will only have to pay USD 997.50. This is a very competitive trait indeed.
Bybit also charges withdrawal fees in the amount of 0.0005 BTC. This is pretty competitive as it 40% less than the global industry average BTC withdrawal fee (0.0008 BTC).
Four major coins are available at Bybit: BTC, ETH, XRP and EOS.
You can trade at 100x leverage on Bybit for BTC and ETH pairs and 25x on EOS and XRP. Their matching engine is allegedly capable of up to 100,000 TPS (Transactions Per Second) which is incredibly impressive and a great future for anyone interested in leveraged trading.
Prime XBT is a new cryptocurrency exchange platform that offers the tried and tested experience of online margin/leverage trading up to 100x on digital assets like Bitcoin, Ethereum, Ripple and Litecoin.
Registered in Seyschelles, the company was founded in 2018 and its exchange started operating in early 2019. Currently the platform provides liquidity, a wide range of trading tools, security and efficiency to traders from more than 150 countries of the world.
Base trading fees for every cryptocurrency on the PrimeXBT platform is a flat one that sits at 0.05%, with added overnight financing fees for good-until-cleared trades. There is a whole host of trading conditions, limits, and margin requirements that traders will be met on PrimeXBT; you can review all of them here.
There are five coins that can be traded on PrimeXBT exchange: BTC, ETH, LTC, XRP, EOS.
Click to read comprehensive guide and review of PrimeXBT.
Bitfinex is a popular Hong Kong-based crypto exchange which constantly clocks in among the top exchanges in terms of daily trade volume.
The platform has met its fair share of controversy in the past, with hacking incidents and being closely linked to Tether causing a lot of negative murmur in the community. One counterpoint to note here is Bitfinex’s relatively high TrustPilot rating of 7.1/10; the sample of 86 reviews suggests that there is a fair amount of people who don’t have that low opinions on the exchange.
A host of trading options is available on the platform including margin trading; Bitfinex allows its users to trade with a leverage of up to 3.3x, with initial equity of 30%. On top of this, traders have access to a number of different order types such as limit, market, and stop orders. You can check out their complete margin trading policy here.
This American exchange has been making the crypto trading rounds since 2015. Originally a normal crypto exchange that offered a whole host of altcoins and tokens for trade, it introduced margin trading (as well as lending) services for its advanced users.
Their leverages aren’t as big as the industry standards dictate, with users being able to set margins of only up to 2.5x. They also charge a rather hefty fee of 15% on any interest you earn as a lender. One thing to note is that the margin trading service isn’t available to US customers since the end of 2018.
The exchange has quite a bad rep among the crypto community, having suffered a hack in 2014 which saw it lose 12% of its Bitcoin reserve (this lost money was partially restored by raising transaction commissions for the non-hacked customers). The company isn’t very well reviewed online, having its TrustPilot rating currently sit at miserable 1.8/10 from 102 total reviews.
Most complaints seem to be aimed at their lack of professionalism, customer care and attentiveness, with withdrawal/verification requests taking weeks, if not months to complete. Some people even had their funds held hostage, with the company asking them to sign actual NDA’s in order to have their money released. With all that said, Poloniex might offer some quality margin trading services but you might wanna reconsider if those services are worth the seemingly very high risk of losing your funds.
Huobi is a Singaporean exchange mainly focused on providing their services to Southeast Asian markets.
It’s a sleek platform with over 100 available cryptocurrencies, offering margin trading as an addition to its regular operation. It has had its share of negative criticism in the past as well, mostly because of its lack of focus on western markets and because some feel their trading volumes are fake. Also, the exchange was hacked in the past, losing 12 thousand BTC in the process.
Huobi offers margin trading services to its customers which are slightly more complicated than what you have with other platforms. One can borrow coins only for a specific trading pair and a fee is charged every 24 hours. Maximum leverage ratios aren’t disclosed anywhere. Check out the platform’s help page on margin trading to learn more.
Another old platform, Kraken has served cryptocurrency traders since 2013. Known in the crypto community as a mostly reliable, secure platform that hasn’t had major security issues in the past, Kraken is also the current world leader in terms of Bitcoin to Euro trading volumes.
Best testament to Kraken’s integrity was the fact that it was chosen as a reliable partner to help facilitate payments to creditors of bankrupted exchange Mt.Gox. Additionally, Kraken also operates is a private securities exchange that allows large financial institutions and high net worth individuals to make anonymous trades (also known as a dark pool).
The platform allows for Bitcoin margin trading with leverages of up to 5x. Supported currencies for margin trading include Augur, Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Monero, Ripple and Tether. Kraken also provides advanced order types such as stop-loss orders and automated trading. Check out their designated margin trading section for more information.
Best Bitcoin Margin Platforms – Final Thoughts
Margin trading is relatively easy to set up and do, it’s learning how to do it what is hard. There are plenty of exchanges, each with its own set of contracts, available on the market, allowing you to trade and use your Bitcoin to go long or short and profit when the price goes up or down. Newbies are recommended to always start first with testnets and demo accounts but some disagree with that, as your testnet habits won’t necessarily translate well into real trading.
Once you’ve mastered the testnet (or have decided to skip it altogether) you should move onto very small real trading amounts. This should help you become more comfortable and teach you about managing your risk and trading responsibly. If you focus on mastering these two skills, you might never get that 100x profit on a single position; what you will definitely get is the knowhow required for steady, healthy gains and the ability to avoid “getting rekt”. And in the long run, knowing how not to get rekt always wins.
CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com