The term cryptocurrency started gaining popularity since the price of Bitcoin started increasing. In 2009, for the first time Bitcoin as a virtual currency came to the market, which was brought to us by Satoshi. Nobody knows about the person behind this name. Still, this person is unknown to us, who brought us the idea of decentralised currency.
At that time, nobody paid much attention to it. Then, from 2011 the price of Bitcoin started increasing. And, today we all can see the result that it has crossed $60,000 in the past 13 years.
This rapid gain in the price of Bitcoin gathered too much attention from many people. As the technology is improving day by day, therefore, in the crypto market also a new term has been added and that is “leverage trading”.
In the following article we will tell everything about leverage, what it is, how it works, why you should avoid leverage while trading in cryptocurrency? and what are those platforms which are offering leverage trading?. We will go through each and every thing in the following article.
What is Leverage, and How Does it Work in Crypto Trading?
In simple terms a leverage can be defined as a power to maximise the buying potential. In Spot trading a trader is offered two types of positions one is long and another is short. If you think that the price will go up then you can go for a long position, and if you think that the market will go down then you can simply go for a short position. Suppose you have $100 and you want to buy a particular lot size of a coin but the cost of that one lot is about $500. So, in that case you can borrow another $400 from the broker as leverage. If you take a successful trade then in that case your profit will also get maximised by 5×. That means, If you gain another $1000 with the help of leverage amount i.e, $400 and your own fund $100, then the total profit of $1000 will be taken by you and some minor fee will get deducted from that profit amount.
But if somehow you lose the trade then you can also lose the amount that you cannot afford. For example, assume you have taken a trade with $100 funds and another $400 as leverage, total of which $500. If a trade goes against your favour then you could also lose $500, which will be required to be paid by you after that to the broker. Many brokers offer high leverage to traders. But it’s not always a good option to go for as your position can also get liquidated.
Top Exchanges Offering Leverage for Trading in Cryptocurrency
For buying and selling the online assets there are many exchanges available offering leverage to the traders. The name of such platforms are as follows:
Binance was founded in 2017. Today, it is one of the biggest exchanges in the world for cryptocurrencies. Currently, on each second the total number of 1.4 million transactions occur. Leverage trading on this platform supports both android and iOS devices. Binance is the most used trading app in the world for its easy user interface and smooth functioning. With the help of this app you can easily check your profit and loss and along with that you can also get information about trade history. If you also want to enjoy the benefits of leverage trading in binance then you must have completed your KYC that is identity verification. A user from those countries which have been blacklisted can’t access this feature. One thing that you must also consider is that Binance has stopped giving margin facility on AUD, EUR and GBP.
- On Binance more than 200 different cryptocurrencies are available.
- Binance is a leading exchange platform for cryptocurrencies
- In the savings account of Binance trader can earn interests on cryptocurrencies.
- Traders can Execute and manage orders with ease.
- Traders are offered leverage up to 10X on spot trading and upto 125X on derivatives trading.
It was founded in 2019 as a cutting edge crypto exchange to the traders. On FTX traders are allowed to liquidate the amount and have the option to get insurance for their funds. If you use this crypto exchange platform on this platform you must keep yourself updated with all the borrowing rates which change each hour.
- On FTX traders are offered a large variety of leverage tokens
- Users can access this app without completing their KTC or identity verification.
- The daily withdrawal limit offered by them is up to $20,000.
- They offer a facility of index futures also.
- Traders can perform both future and crypto trading.
Bybit was established in 2018. ByBit is mainly famous for derivatives trading. It was founded in Singapore. Today ByBit has over 2 million active users globally. The option for margin trading is also offered to the traders at this platform. This app is ideal for beginners as it provides them a smooth user interface. If in case you get bankrupt they also offer insurance funds so as to help the traders to overcome the losses.
- Bybit is one of the fastest growing cryptocurrency exchange platform
- Traders are offered 24/7 client support in multi-languages.
- The maximum limit of leverage is up to 100x
- If you face any kind of financial loss due to any system error or server down then they guarantee return of the total cost of financial loss.
- For risk management they offer a tool to the traders.
- They can perform up to 100,000 transactions within a second.
- One thing which is very important while trading is executing the order on a single click
Leverage trading requires a lot of learning and experience. If you are new to this term then it will be very beneficial to avoid leverage trading in cryptocurrency. As the market of cryptocurrencies is very volatile, within a second you can lose all your hard earned money if you don’t make a decision on time or come into the market with a speculator mentality. Leverage can make you lose that money which you have never seen in your life as a beginner. Always start your trading journey with a small amount of money only. It would be a great decision if you choose to avoid high leverage trades in the beginning. In the end, thanks for reading our article on “Why you should avoid leverage trading in cryptocurrency?“. I hope that our efforts may help you to clear your doubts.