Traders from all over the world have been using crypto margin trading in order to have access to more advanced tools for executing their trading strategies. While most of us use the spot exchange, many other expert traders prefer to trade with margin.
Margin trading crypto means that investors would be able to gain a larger exposure to specific trades by borrowing funds. This is an advanced strategy that could potentially increase profits but at a higher risk. In this guide, we share with you which are the best crypto margin trading exchanges and all the information you should know.
What is Crypto Margin Trading?
Cryptocurrency margin trading involves borrowing funds from other investors in order to gain a larger exposure to specific trades or assets. This is a risky activity that could give larger profits to the investor.
The margin trader would be able to open a position that is two, five, then or even a hundred times larger than his original investment. If the trader invested $100 and used 20x leverage, he would be able to trade with $2,000.
With this in mind, traders are able to get larger exposure to those trades that could be definitely profitable and help them earn larger rewards. If the trade executed with the previous example gets closed with 10% profits ($200), the trader would have made 300% on the initial investment $100.
It is also worth mentioning that the trader would have to pay a small commission for opening and closing his position and a fee for the borrowed funds. At the same time, if the trade is not profitable, the position can get executed and the trader could lose its initial investment.
In the cryptocurrency market, the funds to do crypto margin trading are usually provided by other users on the platform. Traders earn rewards for sharing their funds with margin traders. In some cases, crypto exchanges can also share with users with some margin funds to trade.
There are some advantages and disadvantages of crypto margin trading. As we mentioned, these trades could be very profitable (investors have larger funds to use). But they could also be very risky if the investor does not have enough funds as collateral. This is why it is always recommended to use stop-limit orders when trading with leverage.
Margin traders usually operate in futures markets with perpetual contracts. This is the easiest way to open short and long positions with leverage. This is different from using the traditional spot market.
When we use the spot market, we are buying the underlying asset. For example, when we buy $100 in Bitcoin we get $100 worth of BTC. When we sell these funds, we are selling BTC. Instead, when we trade with contracts, we are not handling the underlying asset but a derivative that follows the price of a specific asset (in this case Bitcoin).
The most common contracts that we can trade on crypto exchanges include perpetual contracts and quarterly contracts. Nonetheless, perpetual contracts are the most popular among investors.
The spot market is used by small investors to buy and sell virtual currencies to hold for long periods of time and also to perform day-trading activities. Some scalpers prefer to use futures contracts. Users that want to hold BTC and other virtual currencies should use the spot market.
Crypto Margin Trading in USA
If you are planning to do crypto margin trading in the USA, then you should search for an exchange that would support crypto margin in your jurisdiction. Not all exchanges offer the same services all around the world. Some platforms offer different services depending on the jurisdiction where they operate.
In general, when you search for a broker or crypto exchange that offers crypto margin trading in USA, you will realize that American citizens are usually banned from trading with leverage. In order to avoid regulatory issues and legal problems, many exchanges are not offering crypto margin trading in USA.
Nonetheless, there are some platforms that could offer you crypto margin trading. Some of these platforms include Kraken, Coinbase, the CME Group, TD Ameritrade, and Bakkt.
As you can see, some of these exchanges and brokers are for large investors or institutions that want to have access to virtual currencies. If you are a retail investor, Kraken and Coinbase would be the best solutions for you.
However, there are also some limitations to these platforms. While most of the crypto exchanges all around the world offer leverage up to 100x (and in some cases more), in the United States, they are limited to offer 5x and 3x. Coinbase offers 3x and Kraken 5x. At the same time, these platforms have added different controls in order for users to trade with leverage.
Moreover, if you want to do crypto margin in USA, you should also know that there are some states that are not allowing residents to trade with leverage. This is why, in addition to the barriers that US investors already find, they should also know whether their state allows them to trade with margin.
Crypto Margin Trading Exchanges
For those users that are not from the United States, the possibilities to do crypto margin trading are endless. There are several exchanges offering margin trading solutions to their clients. In this post, we will focus on just some of these exchanges, but there are many others that you can use.
One of the things to take into consideration is that there is no exchange that offers the best solutions for crypto margin trading. Some of them have additional features while others might have more volume. Traders would select the platform that offers better solutions according to their needs.
Remember, if you are a trader from the United States, you might first want to make sure that the platform allows you to trade with margin.
Let’s start with Binance Futures. This is one of the most popular trading platforms for traders that want to get access to virtual currencies. Due to the expansion of the crypto market in the last years, Binance was able to offer a wide range of services to its clients, including the possibility to trade with leverage.
Nowadays, Biannce Futures is one of the largest platforms in terms of the trading volume. This shows how this platform was able to expand and grow. At the same time, this is a key thing for investors because the exchange is extremely liquid. Large purchases would not affect the price of the futures market and of the trading pairs.
At the same time, Binance Futures offers a wide range of other tools that make the whole trading experience even better. You can use isolated and cross margin to avoid getting liquidated. Moreover, you can set up advanced orders such as stop-loss orders, which would reduce your risks.
In addition, Binance has many other solutions not related to margin trading and that would be definitely useful for investors to diversify their portfolio. This is also one of the reasons why Binance became one of the most popular exchanges. Furthermore, if you care about fees, Binance has one of the lowest in the market.
This legacy cryptocurrency exchange has been operating for several years and it started offering crypto margin trading some time ago. The strongest points of this exchange include a large number of trading pairs and tokens they have added to their platform, the user experience and the fast and kind customer support.
After several years without changing its interface, Poloniex decided to revamp it and it is now one of the easiest exchanges to trade. Newcomers would feel they are using a very simple platform that offers them all the services and solutions they need in order to trade with leverage.
Poloniex is not only offering margin trading for virtual currencies but also lending. In this way, users that want to deposit funds and earn rewards on them can easily do so. The same feature is also present on other platforms as well.
Thanks to the latest improvements that have been added to Poloniex, this became one of the best platforms to trade with margin in the crypto space. Although it does not have one of the largest volumes yet, it has been expanding as an alternative to already established margin trading exchanges.
ByBit became one of the best and most popular platforms to trade with margin in the crypto industry. The interface is very clear and intuitive and the whole platform has been created in order to meet the demand of Bitcoin and crypto margin traders.
Users can trade with as much as 100x leverage and enjoy many other solutions. The exchange has also one of the most advanced executing engines, meaning that there is no lag when you execute the trading orders. On some other exchanges, it is more difficult to get a consistent and stable trading experience.
Furthermore, the platform has added different deposit and withdrawal methods, making it easier and faster for users to get access to virtual currencies. Additionally, for users that want to try the platform and understand how it works, there is a testnet solution that makes it easier for individuals to try the exchange and its capabilities.
Finally, ByBit has also created a fund that ensures that all the positions of every single trader are safe and protected against volatility in the market. This is similar to what BitMEX has done in the past. However, ByBit has focused on the issues that affected BitMEX and improved them.
Phemex is another modern and useful platform that has been operating since 2019 in the cryptocurrency market. Despite being relatively new, the exchange was able to become one of the largest in terms of the trading volume. In just a few months, it was competing against BitMEX, Binance Futures and other exchanges.
This exchange has also added leverage of as much as 100x for advanced traders that want to have a larger exposure to specific trades in the market. In order for users to have even better services, Phemex also has very low fees.
Moreover, to onboard new users and clients. The platform has added a very attractive welcome bonus in order to reach a larger audience. As soon as new clients make a deposit, they would receive a bonus to test the platform and execute the trading strategies they want.
Nowadays, Phemex continues to expand and onboard new clients that bring volume and allow the exchange to become one of the fastest-growing in the industry. In the future, they could add new features and solutions for traders.
The last of our crypto margin trading exchanges is FTX. This platform created for advanced crypto traders has been backed by recognized players in the market such as Binance and Alameda Research. The platform claims to be one of the best in the market for traders that want to get access to the cryptocurrency market.
One of the good things about this platform is that they have added futures contracts not only for Bitcoin (BTC) and Ethereum (ETH) but also to other coins such as Chainlink (LINK) and even EOS. In this way, investors are able to execute even more advanced strategies.
The additional and advanced features offered by FTX are attracting some of the expert traders in the market. For example, the exchange is currently allowing users to buy leveraged tokens. These are ERC-20 assets that give leveraged exposure to users to specific crypto markets.
Furthermore, if you want to go out a little bit from the crypto market, FTC is also allowing users to trade prediction markets. In this way, you can bet on real-world events. Finally, the exchange has some of the lowest fees in the market and they have released their own native token called FTT.
Pros and Cons of Crypto Margin Trading
There are different pros and cons of crypto margin trading. Depending on your needs and requirements you will value some things more than others. The following are some of the pros and cons of crypto margin trading.
Pros of Crypto Margin Trading
These are some of the advantages of crypto margin trading:
- Investors can make larger profits on winning trades
- Users gain a larger exposure to the crypto market
- Traders can use perpetual contracts and also quarterly futures contracts
- There are several platforms to trade with margin
- Fees are usually low and liquidity is high on some platforms
Cons of Crypto Margin Trading
These are some of the disadvantages of crypto margin trading:
- This is a very risky activity
- It is pretended for expert traders
- Users could lose their whole funds