Margin trade in cryptocurrency typically refers to the out-lending or loan which some particular cryptocurrency exchange offers to its users. This is done to increase or multiply the trading capacity of some user with respect to what his current set of investments would otherwise allow him to. Different cryptocurrency exchanges usually offer different margin rates to trade if we compare them with each other. This is because each of them has their own mission and vision statements besides having their own operational constraints. Thus, they way they like to present and offer margin rates and leverages to trade cryptocurrencies vary from one another.
How Do Margin Rates to Trade Cryptocurrency Function
Whenever a margin trade is started, the user or investor is required to commit some amount to the cryptocurrency exchange. This is referred to as margin, and the percentage at which the exchange amplifies it to decide end profits is the leverage to trade cryptocurrency offered by that particular exchange. In lieu of this facility, the exchange charges some percentage of the profits too, which is the margin rate to trade cryptocurrencies. This rate not only varies with the amount of margin, but also with other parameters like guarantees, past track record of the user etc., the type of cryptocurrency sought after, etc. For example if the margin leverage to trade is 10:1, then one would need only 1000 USD of their capital to open a trade of 10,000 USD.
What are the Margin Rates to Trade Cryptocurrencies
The margin rates to trade anything vary from one sector to another. For example, in the typical scenario of stock markets, a rate of 2:1 usually applies. However, if we talk of cryptocurrencies, this leverage is variable from 2:1 to 125:1 most of the times and is routinely referred to as 2x and 125x respectively. Binance has recently come up with the 125x leverage to its users, which is considered a great feature. However, this is the leverage. The loan, or this leverage is actually backed up by collaterals or funds in your cryptocurrency account, and has to be paid back with due interest, or the margin rate. This rate is also variable across variable platforms and one must research thoroughly as to the terms and conditions and the rates that various exchange offers before deciding to margin trade cryptocurrencies with them. This is primarily because, with higher leverage comes higher risk of loss in case of misfortune or your speculation going wrong. This is perhaps the reason that investors these days prefer to hire companies like executium.com, who are experts in this field, to manage their margin rates to trade cryptocurrency.
Comparison of the Margin Rates to Trade Cryptocurrencies
At the time of writing this, Binance offers 1-125x starting at about 0.1% taker fee. Bybit offers a 100x leverage at a rate that starts at 0.075% of the taker fee. BitMex is the same as Bybit. Karaken is considered to be the most reputable, especially for U.S. citizens and it offers about 5x starting at 0.02% of the taker fee.