Crypto Margin Trading – Tutorial & Best Exchanges
With a boom in cryptocurrency, margin trading on this volatile asset provides new and potentially lucrative opportunities. In this tutorial, we explain how to trade crypto on margin plus offer tips for choosing the best exchanges and platforms. We also cover the pros and cons of crypto margin trading and a guide to getting started.
Crypto Margin Trading Platforms
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eToro USAInvest $100 and get $10Securities trading offered by eToro USA Securities, Inc. (“the BD”), member of FINRA and SIPC. Cryptocurrency offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk. https://www.daytrading.com/ is not an affiliate and may be compensated if you access certain products or services offered by the MSB and/or the BD.
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$100$10SEC, FINRAStocks, Options, ETFs, CryptoeToro Trading Platform & CopyTraderACH Transfer, Debit Card, PayPal, Wire TransferUSD -
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NinjaTrader
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$00.01 Lots1:50NFA, CFTCForex, Stocks, Options, Commodities, Futures, CryptoNinjaTrader Desktop, Web & Mobile, eSignalACH Transfer, Debit Card, Wire Transfer, ChequeUSD -
3
Interactive Brokers
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$0$1001:50FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA, AFMStocks, Options, Futures, Forex, Funds, Bonds, ETFs, Mutual Funds, CFDs, CryptocurrenciesTrader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentralCheque, ACH Transfer, Wire Transfer, Automated Customer Account Transfer Service, TransferWise, Debit CardUSD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF -
4
OANDA USCFDs are not available to residents in the United States.
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$00.01 Lots1:50NFA, CFTCForex, Crypto with Paxos (Cryptocurrencies are offered through Paxos. Paxos is a separate legal entity from OANDA)OANDA Trade, MT4, TradingView, AutoChartistWire Transfer, Visa, Mastercard, Debit Card, ACH TransferUSD, EUR, GBP, CAD, AUD, JPY, CHF, HKD, SGD -
5
UpholdTerms Apply. Cryptoassets are highly volatile. Your capital is at risk.
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$0$1CryptosDesktop Platform, Mobile AppWire Transfer, ACH Transfer, Bitcoin Payments, Debit Card, Credit Card, Mastercard, Visa, Ethereum PaymentsUSD, EUR, GBP -
6
IQCent20% to 200% Deposit Bonus
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$250$0.011:500IFMRRCBinary Options, CFDs, Forex, Indices, Commodities, CryptoOnline Platform, TradingViewCredit Card, Debit Card, Wire Transfer, Bitcoin Payments, Ethereum Payments, Visa, MastercardUSD, EUR -
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IGForex trading involves risk. Losses can exceed deposits.
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$00.01 Lots1:30 (Retail), 1:250 (Pro)FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB, AFMCFDs, Forex, Stocks, Indices, Commodities, ETFs, Futures, Options, Crypto, Spread BettingWeb, ProRealTime, L2 Dealer, MT4, TradingView, AutoChartist, TradingCentralPayPal, Wire Transfer, Mastercard, Credit Card, Visa, Debit CardUSD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD -
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Plexytrade120% Cash Welcome Bonus
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$500.011:2000CFDs, Forex, Indices, Stocks, Commodities, CryptoMT4, MT5Bitcoin Payments, Ethereum PaymentsUSD, EUR -
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CEX.IO
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
$20$1GFSCCryptosTradingViewDebit Card, Credit Card, Wire Transfer, Swift, Skrill, Visa, Mastercard, PayPal, Neteller, Apple Pay, Google Wallet, Bitcoin PaymentsUSD, EUR, GBP -
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Coinexx100% Deposit Welcome Bonus
Ratings/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5/ 5
0.001 BTC0.01 Lots1:500Forex, Commodities, Indices, CryptocurrenciesMT4, MT5Bitcoin Payments, Ethereum PaymentsUSD
Here is a summary of why we recommend these brokers:
- eToro USA - eToro US offers 24 tradeable cryptoassets, with just a 1% buying/selling fee added to the spread. Additionally, there are 80 different coins available through the broker’s proprietary wallet service. You can also practice your crypto strategies easily by switching between live and demo mode. Crypto asset investing is highly volatile and unregulated. No consumer protection. Tax on profits may apply.
- NinjaTrader - You can get exposure to micro Bitcoin futures through the CME Group’s centralized exchange, which is highly regulated by the US CFTC. Micro contracts allow you to trade a fractional size of one Bitcoin, giving you more risk control and order flexibility.
- Interactive Brokers - IBKR lets you purchase and hold Bitcoin, Bitcoin Cash, Ethereum, and Litecoin at competitive commission rates and without needing a crypto wallet. Additionally, there is a range of other diverse assets to explore, such as crypto indices like the NYSE Bitcoin Index, as well as futures contracts like the BAKKT Bitcoin Futures.
- OANDA US - Cryptocurrency trading is offered via Paxos, a separate entity from Oanda. You can speculate on the world’s biggest cryptos by market cap. Commissions are lower than many peers starting at 0.25%. Through the broker’s partnership with Paxos, clients can spot trade cryptocurrencies on the itBit exchange through the OANDA native platform.
- Uphold - You can buy and sell 250+ crypto assets with fiat currencies or in crypto pairs using the straightforward mobile app or through Uphold's browser-based account homepage. This is significantly more than many rivals. You can also earn up to 16% APY by staking one or more out of 32 valid tokens, or send tokens to an external wallet.
- IQCent - IQCent offers 17 crypto pairs through its proprietary terminal, including Bitcoin, Ethereum and Litecoin. Leverage on crypto CFDs is capped at 1:10, whilst binary options payouts vary by token but remain competitive. OTC assets, for example, pay out up to 95%.
- IG - IG's modest selection of 11 crypto CFDs trails top crypto brokers like Vantage which offers 40+ tokens. That said, it stands out with its crypto index, which tracks the value of the top 10 digital currencies by market cap and provides a holistic way to speculate on the value of the crypto market.
- Plexytrade - Plexytrade lets traders capitalize on the inherent volatility of the cryptocurrency market by offering leveraged trading on 5 popular cryptocurrencies, including Bitcoin. However, the threadbare offering of digital tokens seriously trails leading brokers like Eightcap with its 100+ crypto derivatives.
- CEX.IO - CEX.IO offers hundreds of popular cryptocurrencies including big names like Bitcoin, Ethereum and Litecoin. The trading platform is well-designed with sophisticated charting and analysis tools, including 50+ in-built indicators. Traders can also reduce their monthly volumes through the tiered pricing structure.
- Coinexx - Trade CFDs on BTC, ETH, LTC and XRP with 1:5 leverage, market execution and 0.01 micro lot trading. However, we weren't impressed with the narrow choice of cryptos with no emerging, smaller-cap tokens available.
eToro USA
"eToro remains a top pick for traders looking for leading social investing and copy trading services. With a low deposit, zero commissions and an intuitive platform, the broker will meet the needs of newer day traders."
eToro USA Quick Facts
| Bonus Offer | Invest $100 and get $10 |
|---|---|
| Coins | BTC, ETH, BCH, DASH, LTC, ETC, MIOTA, XLM, EOS, NEO, ZEC, XTZ, MKR, COMP, LINK, UNI, YFI, DOGE, AAVE, ALGO, MANA, ENJ, BAT, MATIC, FLR, SHIBxM |
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | BTC 0.75% |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | eToro Trading Platform & CopyTrader |
| Minimum Deposit | $100 |
| Regulator | SEC, FINRA |
| Account Currencies | USD |
Pros
- eToro USA Securities is a trustworthy, SEC-regulated broker that is a member of FINRA and SIPC
- A free demo account means new users and prospective day traders can try the broker risk-free
- The broker's Academy offers comprehensive learning materials for beginners to advanced-level investors
Cons
- The proprietary terminal doesn't support trading bots and there are no additional stock market analysis tools
- There's a narrower range of day trading instruments available compared to competitors, with only stocks, ETFs and cryptos
- There's no MetaTrader 4 platform integration for traders who are accustomed to using third-party charting tools
NinjaTrader
"NinjaTrader continues to meet the demands of active futures traders looking for low fees and premium analysis tools. The platform hosts top-rate charting features including hundreds of indicators and 10+ chart types."
NinjaTrader Quick Facts
| Coins | BTC |
|---|---|
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | Floating |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | NinjaTrader Desktop, Web & Mobile, eSignal |
| Minimum Deposit | $0 |
| Regulator | NFA, CFTC |
| Account Currencies | USD |
Pros
- You can get thousands of add-ons and applications from developers in 150+ countries
- NinjaTrader continues to deliver comprehensive charting software for active day traders with bespoke technical indicators and widgets
- Traders can get free platform access and trade simulation capabilities in the unlimited demo
Cons
- The premium platform tools come with an extra charge
- Non forex and futures trading requires signing up with partner brokers
- There is a withdrawal fee on some funding methods
Interactive Brokers
"Interactive Brokers is one of the best brokers for advanced day traders, providing powerful charting platforms, real-time data, and customizable layouts, notably through the new IBKR Desktop application. Its superb pricing and advanced order options also make it highly attractive for day traders, while its diverse range of equities is still among the best in the industry."
Christian Harris, Reviewer
Interactive Brokers Quick Facts
| Coins | BTC, LTC, ETH, XRP |
|---|---|
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | 0.12%-0.18% |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentral |
| Minimum Deposit | $0 |
| Regulator | FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA, AFM |
| Account Currencies | USD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF |
Pros
- The new IBKR Desktop platform takes the best of TWS while adding bespoke tools like Option Lattice and Screeners with MultiSort to create a genuinely impressive trading experience for day traders at every level.
- IBKR is one of the most respected and trusted brokerages and is regulated by top-tier authorities, so you can have confidence in the integrity and security of your trading account.
- There's a vast library of free or paid third-party research subscriptions catering to all types of traders, plus you can enjoy commission reimbursements from IBKR if you subscribe to Toggle AI.
Cons
- TWS’s learning curve is steep, and beginners may find it challenging to navigate the platform and understand all the features. Plus500's web platform is much better suited to new traders.
- IBKR provides a wide range of research tools, but their distribution across trading platforms and the web-based 'Account Management' page lacks consistency, leading to a confusing user experience.
- You can only have one active session per account, so you can’t have your desktop program and mobile app running simultaneously, making for a sometimes frustrating trading experience.
OANDA US
"OANDA remains an excellent broker for US day traders seeking a user-friendly platform with premium analysis tools and a straightforward joining process. OANDA is also heavily regulated with a very high trust score."
OANDA US Quick Facts
| Coins | BTC, ETH, LTC, BCH, PAXG, LINK, UNI, AAVE |
|---|---|
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | $100 |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | OANDA Trade, MT4, TradingView, AutoChartist |
| Minimum Deposit | $0 |
| Regulator | NFA, CFTC |
| Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, CHF, HKD, SGD |
Pros
- The broker's API facilitates access to 25 years of deep historical data and rates from 200+ currencies
- There's a strong selection of 68 currency pairs for dedicated short-term forex traders
- Beginners can get started easily with $0 minimum initial deposit
Cons
- It's a shame that customer support is not available on weekends
- There's only a small range of payment methods available, with no e-wallets supported
- The range of day trading markets is limited to forex and cryptos only
Uphold
"Uphold remains a top choice for crypto investors looking for a one-stop-shop solution to accessing the markets. There are over 250 tokens to buy, sell and trade through flexible platform options."
Uphold Quick Facts
| Coins | BTC, BTCO, AAVE, ALCX, DYDX, INH, XYO, API3, GHST, LSK, AUDIO, GLMR, NMR, CAKE, GODS, REQ, CHR, TRB, DAO, ROOK, XRP, ETH, BAT, ADA, ALGO, ATOM, AVAX, AXS, BCH, BAL, BTG, CSPR, COMP, CRV, DASH, DCR, DGB, DOGE, DOT, EGLD and many more |
|---|---|
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | Up to 1.5% |
| Crypto Lending | No |
| Crypto Staking | Yes |
| Platforms | Desktop Platform, Mobile App |
| Minimum Deposit | $0 |
| Account Currencies | USD, EUR, GBP |
Pros
- Crypto staking is available on 30+ tokens with above-average rates up to 16%
- Uphold is 100% reserved which helps to protect client funds
- Two-step authentication bolsters user security
Cons
- There is a 2.49% fee if you want to use debit or credit cards
- Customer service is slow based on tests, with limited contact options
- The charting analysis features on the platform trail specialist exchanges
IQCent
"IQCent will appeal to day traders looking for a straightforward binary options and CFD trading platform with low fees, a range of accounts, and copy trading. Getting started takes less than 1 minute and a $250 deposit. "
IQCent Quick Facts
| Bonus Offer | 20% to 200% Deposit Bonus |
|---|---|
| Coins | BTC, ETH, LTC, ETC, DOGE, MATIC, QNT, SOL, XRP, USDT, XMR, BNB |
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | Variable |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | Online Platform, TradingView |
| Minimum Deposit | $250 |
| Regulator | IFMRRC |
| Account Currencies | USD, EUR |
Pros
- There's an accessible $0.01 minimum stake for new day traders with a small budget
- The broker's 24/7 customer support is fast and reliable, responding within 1 minute during tests
- CFD trading fees are competitive based on tests, including 0.7 pips on major forex pairs such as EUR/USD
Cons
- IQCent charges a punitive $10 monthly inactivity fee if you fail to place at least 1 trade per month
- The broker is not overseen by a respected regulator, though this is common among binary options firms
- The market analysis is very basic with limited technical summaries and insights from analysts
IG
"IG continues to provide a comprehensive package with an intuitive web platform, best-in-class education for beginners, advanced charting tools bolstered by its recent TradingView integration, real-time data, and fast execution speeds for experienced day traders."
IG Quick Facts
| Coins | BTC, BCH, LTC, ETH, ADA, DOT, DOGE, LINK, UNI, XLM |
|---|---|
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | Variable |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | Web, ProRealTime, L2 Dealer, MT4, TradingView, AutoChartist, TradingCentral |
| Minimum Deposit | $0 |
| Regulator | FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB, AFM |
| Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD |
Pros
- The IG app offers a superb mobile trading experience with a clean design that helped it secure Runner Up at our 'Best Trading App' award.
- IG is amongst the best in terms of its range of instruments, which includes stocks, forex, indices, commodities, and cryptocurrencies, plus recently added US-listed futures and options, providing ample diversification opportunities.
- The ProRealTime advanced charting platform is free as long as certain modest monthly trading activity requirements are met.
Cons
- IG applies an inactivity fee of $12 per month after 2 years, deterring casual investors.
- Beginners might find IG’s fee structure complex, with various fees for different types of trades or services, potentially leading to confusion or unexpected charges.
- IG has discontinued its swap-free account, reducing its appeal to Islamic traders.
Plexytrade
"Plexytrade is a newcomer in the brokerage scene with attention-grabbing features like 1:2000 leverage, zero spreads on select instruments and fast execution speeds of less than 46 milliseconds. However, the absence of regulation is a significant concern, while the non-existent research and educational tools place it far behind industry frontrunners."
Plexytrade Quick Facts
| Bonus Offer | 120% Cash Welcome Bonus |
|---|---|
| Coins | BTC, ETH, LTC, SOL, XRP |
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | 1.1 |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | MT4, MT5 |
| Minimum Deposit | $50 |
| Account Currencies | USD, EUR |
Pros
- Plexytrade accommodates a range of trading methods and short-term strategies, including scalping, hedging, and automated trading.
- US residents are accepted as clients, distinguishing Plexytrade as one of the rare offshore brokers that cater to US-based traders.
- There are various VPS packages starting from $50 per month, but they become complimentary once specific deposit thresholds are reached.
Cons
- There are no research and educational materials, falling short of alternatives like IG, while access to the economic calendar is restricted to clients with balances of $500.
- Deposits and withdrawals are exclusively facilitated through cryptocurrencies, as Plexytrade does not support bank cards, bank wire transfers, or e-wallets.
- With around 100 instruments, Plexytrade restricts the flexibility of investors who prefer to trade across various assets, especially compared to Blackbull with its 26,000 securities.
CEX.IO
"CEX.IO continues to serve a range of crypto investors looking to buy, sell, trade, hold and earn with low fees. The tiered pricing structure will appeal to active traders while rookie investors will enjoy the straightforward platform interface and excellent education."
CEX.IO Quick Facts
| Coins | ZRX, 1INCH, AAVE, BTC, BCH, ADA, LINK, COMP, ATOM, DAI, DOGE, ETH, GUSD, ICP, LTC, LRC, MATIC, MKR, DOT, SHIB, SOL, XLM, SUSHI, SNX, USDT, XTZ, USDC, UNI, WBTC, ZIL |
|---|---|
| Crypto Mining | Yes |
| Auto Market Maker | No |
| Crypto Spread | 0.15% maker & 0.25% taker (Standard) |
| Crypto Lending | Yes |
| Crypto Staking | Yes |
| Platforms | TradingView |
| Minimum Deposit | $20 |
| Regulator | GFSC |
| Account Currencies | USD, EUR, GBP |
Pros
- The range of 200+ cryptocurrencies is competitive and will serve more experienced traders
- High quality educational materials are available through the University feature
- There's a wide range of global payment methods available including PayPal
Cons
- The broker has limited regulatory oversight
- It's a shame that there's no demo account for traders looking to practice strategies
- Deposit and withdrawal fees are relatively high, including 0.3% + $25 for SWIFT withdrawals
Coinexx
"Coinexx best serves short-term traders willing to foregoes regulatory protections in return for highly-leveraged CFDs and trading accounts, deposits and withdrawals processed in cryptos like BTC. "
Coinexx Quick Facts
| Bonus Offer | 100% Deposit Welcome Bonus |
|---|---|
| Coins | BTC, ETH, LTC, XRP |
| Crypto Mining | No |
| Auto Market Maker | No |
| Crypto Spread | From 0.0 pips |
| Crypto Lending | No |
| Crypto Staking | No |
| Platforms | MT4, MT5 |
| Minimum Deposit | 0.001 BTC |
| Account Currencies | USD |
Pros
- Coinexx is one of a limited pool of brokers to support the ActTrader platform, which is highly customizable with detachable widgets, as well as 48 indicators, 11 timeframes, and price quotes up to 8 decimal places.
- Coinexx uses an ECN model that facilitates ultra-tight spreads from 0 pips, which alongside high leverage up to 1:500, may serve fast-paced, high-volume trading strategies.
- The virtual private server (VPS), hosted near the firm’s data center in Amsterdam, offers 24/7 connectivity, low latency and 99.99% uptime, catering to algo traders.
Cons
- Despite operating for over 7 years, Coinexx still hasn’t secured any regulatory approvals, respected industry awards or the full confidence of our experts.
- Although it supports near-instant account funding in 25+ cryptos, the absence of fiat deposit options at Coinexx will be severely limiting for many traders.
- Aside from 7 calculators (forex, margin, pip, currency, commission, swap, PnL), Coinexx offers very little in terms of additional tools, with no education or research features to support traders.
What Is Crypto Margin Trading?
Crypto margin trading is the practice of using leverage to multiply the results of a trade. The amount a trader has deposited in their account is known as the margin.
A broker offering margin trading will provide traders with a leverage quote, this is usually displayed as either a ratio (e.g 1:2) or a multiple (e.g 2x), meaning that for every 1 base crypto coin, the results of a trade are multiplied by 2.
To enable traders to open larger positions, the broker allows them to borrow capital. This will need to be paid back in full, but the profits can be retained by the trader.
For example, if your leverage is 1:2 and you deposit $1,000, you can open positions with a total value of $2000.
If you use this to purchase Ethereum and the price moves 5%, you’ll have $2,100 worth of ETH.
If you close your trade there and return the $1,000 borrowed, you’re left with $1,100, having made a $100 profit.
If you’d placed the same trade in your spot account, you’d have made a $50 profit.
It’s important to note that profits are amplified, but equally, so are losses. Plus, your borrowed amount will still need to be returned. Therefore, margin trading on cryptos should only be utilised by knowledgeable investors.
Some of the top crypto exchanges now offer crypto margin trading, including Binance, Kraken and Crypto.com. However, it is a fairly new practice, so some of the top brokers for professionals, such as TradeStation, are yet to facilitate crypto margin trading.
What Is A Margin Call?
If the price of the asset held on margin drops in value significantly, a broker will issue a margin call. This means that traders will have to prove that they can return the amount borrowed, by depositing more funds.
The account will usually be suspended from opening new trades until this has been completed, or the asset rises in value again.
A margin call is designed to protect traders from losing more than they can afford.
For example, if you’re trading $1,000 on margin with 5x leverage and the value of ETH drops 17.5%, the value of the asset you hold is now worth $4,125.
Your operating loss is -$875. Since you’ve only deposited $1,000, you’re in danger of losing more than your initial deposit amount if the value slips further. At this point, a margin call may be issued.
Pros Of Crypto Margin Trading
- Lower capital requirements – Some Bitcoin trading strategies that require large amounts of capital. For example, scalping is the practice of executing short and sharp trades to collect small profits regularly. Crypto margin trading allows traders to maximise the results of each trade and means profits can accumulate quickly.
- 24/7 margin trading – Unlike the forex and commodities markets, crypto can be traded 24/7. If you’re a weekend trader, this means you can take advantage of margin trading outside of usual operating hours.
Cons Of Crypto Margin Trading
- Losses are amplified – While crypto trading on margin can mean increased profits, it also means that any losses are multiplied. Losses can exceed the deposit amount, so the risk involved is significantly larger when compared with trading on a cash account. Traders should consider whether they can afford the risk.
- Interest on borrowed crypto – While traders keep all the profits from their trades, some exchanges, such as Binance, charge interest on the borrowed amount. The rate varies based on the cryptocurrency and the length of time capital is borrowed.
- Negative balance protection – In the world of forex, margin trading has been around a while. Therefore, most brokers are subject to regulation that aims to protect retail investors. In the UK, forex brokers regulated by the Financial Conduct Authority (FCA) must provide negative balance protection, for example. This means that traders are prevented from losing more than their deposit amount when trading on margin. This level of protection is not available in the crypto industry, leaving altcoin margin traders exposed to significant risk.
- Brokers and exchanges – Having mentioned the lack of regulation above, there is a global tightening of restrictions that is already impacting the availability of crypto margin trading. In 2020, Coinbase Pro, one of the top Bitcoin exchanges, suspended margin trading for US customers, citing new guidance from the Commodity Futures Trading Commission (CFTC). Binance and Robinhood also restrict margin trading on cryptos for US customers and eToro has suspended it at times due to volatility. These restrictions could increase and margin trading on crypto assets phased out on Bitcoin exchanges in the US and potentially other jurisdictions too.
- Limited trading pairs – Not all crypto margin trading platforms offer leverage on all pairs, sometimes it’s only available on one or two. This limits traders’ scope for utilising an arbitrage strategy. For example, crypto.com only offers margin trading on BTC/USDT.
How To Start Crypto Margin Trading
To start crypto margin trading, you’ll first need to select a broker or an exchange that provides the service. Some of the best crypto exchanges that offer margin trading include Binance and Kraken. Then sign up to an account and complete any KYC checks. Most exchanges will require proof of identity if they also offer fiat exchange, however, there are some, such as Prime XTB, which have no KYC checks. Next, visit your settings. There will usually be an option to switch your account from spot to margin trading. In some cases, you’ll then need to transfer tokens to your margin account.
Choosing A Crypto Margin Trading Broker
- Leverage offered – Take a look a what leverage a broker is offering to understand how much you can trade. If you’re happy with the risks involved, higher leverages can mean higher profits, but they’re not always necessary. Both Binance and Kraken offer leverage of 1:5 when crypto margin trading. Crypto.com offers 1:3 and IC Markets offers 1:2.
- Fees – The fee structure for margin trading varies per broker. Some operate by allowing traders to borrow tokens as leverage, including Binance. In this instance, interest is usually charged on the borrowed amount. Kraken, on the other hand, charges an opening and closing fee on the spot value of the trade. A rollover fee is applied based on how long the position is held. Look for a broker whose fee structure you’re comfortable with. Also, taxes will usually need to be paid on any gains, in line with rules in your jurisdiction.
- Demo accounts – Since Bitcoin margin trading involves an increased level of risk, traders must have the opportunity to practice their strategies using signals beforehand. A trading simulator and online courses allow clients to trial strategies before using real money. Profit calculators are also useful to help predict the outcome of a trade and can replace the manual spreadsheet you’ve previously worked with. Plus500 offers a great CFD crypto-simulator with 2x leverage, however this is only available on their professional trading account.
Final Word On Crypto Margin Trading
Now we’ve explained the ins and outs of crypto margin trading, you’ve hopefully got the understanding to get started. Bitcoin and other cryptos are highly volatile markets and while trading on margin can mean huge upside, retail investors should also be aware of the risks involved. It’s possible this asset could suffer from increased regulation in the future, but for now, it represents an exciting opportunity for traders.
FAQ
How Does Bitcoin Margin Trading Work?
Crypto margin trading means investors can multiply the results of their Bitcoin trade by utilising leverage. Leverage is the number of times you can multiply the results, it is either written as a ratio (e.g 1:3) or a multiple (e.g 3x). Leverage allows traders to borrow funds from their broker. In this way, a trader can execute much larger positions than their deposit amount and can amplify profits.
Are There Many Crypto Exchanges That Allow Margin Trading?
The top crypto margin trading exchanges that allow margin trading include Kraken and Binance, but there are more to choose from. However, availability does vary by location. Some popular exchanges, including eToro and Coinbase, have suspended crypto margin trading at times due to volatility in the market.
Is Crypto Margin Trading Legal In The USA?
Bitcoin margin trading in the United States is restricted by the Commodity Futures Trading Commission (CFTC). Regulated exchanges that previously offered the service, such as Coinbase and Binance, have removed leveraged trading in 2021 for clients from the USA.
Will A Crypto Margin Call Go Away?
A margin call will cease once your account has been deposited with sufficient funds or the asset has increased in value. A margin call is designed to protect a trader from losses that exceed their deposit amount.
Can I Trade Crypto On Margin?
Yes, some of the top Bitcoin exchanges now offer trading on margin, with the opportunity to multiply the results of any trade. Whilst the practice is restricted in some jurisdictions, like the US, it is available in the UK, Australia, India, and Canada, to name just a few.