Unlike regular stock brokerages, margin trading is available to anyone in the crypto world. There are no minimum investment requirements, no minimum account balances, and no margin-specific application processes.
If you’re interested in making leveraged investments in crypto, keep reading. We’re going to look at the best cryptocurrency exchanges for margin trading.
What Is Margin Trading?
When you trade using margin, you are borrowing capital from a third-party so you can enter positions that are larger than your account balance. In the crypto world, the third-party is usually another trader.
Because margin allows you to hold larger positions, your trading results—both gains and losses—will be amplified. For example, if you take a 10x leveraged position and the market moves up five percent, you would see a 50 percent profit. If it moves five percent down, you would be facing 50 percent losses.
If the price moves against you, the broker can issue a margin call. You will need to deposit more cash or sell assets. If you fail to do so and the price moves further, you will be force-liquidated.
Before you start Bitcoin margin trading, make sure you have a robust risk management strategy in place. And remember—use stop-losses!
If you follow crypto Twitter, you will have probably noticed Bybit has been enjoying a considerable amount of hype in the last few months. The exchange only went live in December 2018, but it’s experiencing rapid growth.
The big selling point of Bybit is its order matching system. It can handle up to 100,000 transactions per second (TPS). It means your orders will always complete, even during periods of high usage during extreme volatility. The same cannot be said for many of the service’s competitors; the web is littered with stories from people who lost money thanks to overloaded systems on other exchanges.
You can use Bybit to trade perpetual contracts in BTC, ETH, EOS, and XRP against the dollar.
The exchange offers 100x leverage on positions of up to 100 BTC in value. The maintenance margin (the account value required to maintain your position) is a fixed 0.5 percent.
Bybit does not have a KYC process.
Margin trading on Binance is a new development. After a prolonged testing period, it finally went live to all Binance customers in mid-July 2019.
When the firm first announced that it planned to introduce margin trading, it said it would allow leverage of up to 20x. However, at the time writing (just a couple of days after the global rollout), it only offers 3x leverage.
Cryptocurrency margin trading on Binance is currently only available on BTC, ETH, XRP, BNB, TRX, and USDT pairs. There’s a 0.02 percent fee (reduced to 0.01 percent on BNB).
In order to use Binance, you need to have completed the company’s KYC checks and enabled 2FA on your account. You’ll also need to move funds into a new margin wallet. There is no fee to do so.
BitMEX is arguably the most well-known cryptocurrency exchange for Bitcoin margin trading.
It offers leveraged crypto trading on six different tokens: Bitcoin, Bitcoin Cash, Cardano, Ethereum, Litecoin, and Ripple.
The amount of leverage available depends on the token you want to trade. At the top end, Bitcoin margin trading permits up to 100x leverage. Ethereum is 50x, Litecoin is 33.33x, and Ripple, Cardano and Bitcoin Cash allow up to 20x.
Only Bitcoin margin trading has a settlement fee (0.05 percent). There is no settlement fee for margin trading with altcoins.
Bitcoin leverage trading also has a different maker and taker fee structure (0.0250/0.0750 percent) compared to the altcoins (0.0500/0.2500 percent).
Cryptocurrency margin trading on Bitfinex has some great benefits a couple of notable disadvantages.
On the upside, it is one of the few crypto exchanges which allows margin trading on any of the pairs on its platform. You’re not restricted to Bitcoin, Ethereum, and the other big players.
But experienced margin traders might not like the low maximum leverage. You are limited to 3.3x positions (i.e., if your account balance is $1,000, you can have a tradable balance of up to $3,333). There’s a 0.1 percent maker fee and a 0.2 percent taker fee.
Bitfinex issues margin calls when the net value of your balance reaches 22.5 percent of the initial value of the margin position. The maintenance margin is 15 percent. You will be force-liquidated if you drop below that level.
5. Prime XBT
Our last recommendation for margin crypto trading is Prime XBT. Like BitMEX and Bybit, you can open positions with up to 100x leverage.
Leveraged trading is available on all the platform’s assets, including BTC, ETH, EOS, XRP, and LTC. You can use the margin facility to open both short and long positions.
100x leverage is available on Bitcoin positions with between 0 BTC and 10 BTC of exposure. 10 BTC to 60 BTC is limited to 50x, and 60 BTC and above is limited to 10x. There are similar levels in place for margin trading on altcoins.
Prime XBT also ranks as one of the best cryptocurrency exchanges for margin trading thanks to its general user-friendliness. For example, there’s no KYC process, you can make deposits into your account in more than 130 altcoins and any fiat currency supported by Changelly, and the trading platform supports multiple monitors.
Margin Trading Is High Risk
Although these five crypto exchanges are among the best for margin trading Bitcoin, we’re certainly not suggesting that you dive right in and start using the margin facilities. Margin trading is a high-risk form of trading in a market sector that’s already high-risk.
If you’re not an experienced trader, try using paper trading accounts until you’re confident in your skills.
Disclaimer: This is not investment advice. Bitcoin and other cryptocurrencies are highly speculative. Nothing is guaranteed in cryptocurrency. Always perform your own research before investing and never commit more money than you are comfortable losing.