Understanding Leverage And Margin In Crypto Trading: Best Cryptocurrency Leverage Trading Platforms In 2024

Donald Trump’s big win in the U.S. elections has sparked a surge of optimism across the entire cryptocurrency market. Consequently, Bitcoin achieved a groundbreaking milestone, surpassing the $100,000 milestone for the first time and attaining an all−time high of $103,600 during early Asian trading hours on Thursday, December 5th. Undeniably, the election’s outcome has reignited immense enthusiasm and bullish sentiments throughout the cryptocurrency sector, propelling it to unprecedented heights.

Under such a bull run sentiment, more and more savvy investors are shifting their focus to crypto market. To gain generous profit in crypto trading, leverage trading is often used as a kind of advanced and efficient trading strategy. This strategy enables you borrow against your collateral to multiply your gains by 2x, 10x, or as much as 200x on your winning crypto trades.

Then, what is crypto leverage trading? How does it work? Next, let’s dive in and find out the best crypto leverage trading platforms in 2024.

Table of Contents

What is Leverage?

What is Margin?

What is Crypto Leverage Trading?

How does Crypto Leverage Trading Work?

Risks and Benefits of Crypto Leverage Trading

How to Select the Best Crypto Leverage Trading Platform?

Best Cryptocurrency Leverage Trading Platforms for 2024

Binance

MEXC

BTCC (Most Recommended)

Conclusion

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What is Leverage?

Before we learn about crypto leverage trading, its necessary for us to know what leverage means in crypto trading. Leverage means that a trader uses a smaller amount of capital on hand to open a larger trading position by borrowing funds, thereby increasing returns and risks. The size of the lever is usually measured by a ratio, such as 1:100 or 1:500. This ratio represents how much a trader can borrow to trade for every dollar of his own money invested. For example, trading using leverage of 30:1 means that for every US$1 of available margin that you have in your account, you can place a trade worth up to US$30.

To put it simply, leverage enables investors to take a small amount of money and increase its value on the investment markets. Trading with leverage can provide increased buying power and enhanced returns, it is also important to keep in mind that it also magnifies the potential losses and increases the risk of your position. If the market moves against investors’ expectations, leverage can cause losses to grow rapidly, possibly even more than the initial investment amount.

What is Margin?

Margin represents the initial deposit you place in your trading account, serving as the amount that the crypto exchange requires you to deposit in order to actually access margin trading on the platform. Conceptually, margin can be envisioned as collateral demanded by the exchange to facilitate additional funding for amplifying your trading position.

Imagine you possess $1,000 and want to trade a position worth $5,000. By depositing the $1,000 into your margin account, the crypto exchange advances you the additional $4,000. In this case, the $1,000 you deposited is the initial margin. Margin is usually expressed as a ratio, and in our example the margin offered by the exchange is 5:1. Remember, upon closing your position, you repay the borrowed amount alongside any accumulated interest.

To prevent liquidation of your position, it’s crucial to maintain your account balance above the maintenance margin, which is simply the minimum amount of capital you need in your account to ensure that your open trades remain active. Failure to do so may result in the exchange liquidating your position. Upon receiving an alert warning that your account has dropped to the maintenance margin, you have the option to bolster your initial margin by depositing more funds or sell portions of your portfolio to safeguard your account from dipping below this threshold.

Leverage vs Margin Trading: What’s the Difference?

Margin serves as a tool to create leverage, and while the terms margin trading and leverage are frequently used interchangeably, there is a subtle distinction between them. Margin trading is predominantly associated with spot markets, whereas leverage trading typically pertains to derivatives trading, including perpetual futures. Leverage trading can also encompass other products, such as leveraged tokens that do not necessitate collateral.

Spot trades are executed at the current market price, with immediate delivery of the traded assets upon completion of the trade. In contrast, derivatives trades derive their value from an underlying asset, like BTC, but the settlement may occur in another asset, such as USDT in the case of a BTC perpetual futures contract.

Leverage can be likened to using a cheater bar to remove a stubborn lug nut, as it acts as a force multiplier. The greater the distance from the fulcrum (representing 1x leverage), the more leverage you possess. Additionally, the concept of “margin of error” can help illustrate how margin functions in leveraged trades. Essentially, the margin serves as a buffer for potential losses, representing the maximum amount you can afford to lose in a leveraged trade before your margin collateral is depleted.

In practice, you are likely to face liquidation before your entire margin is utilized in a trade. Exchanges and trading platforms establish liquidation levels above a certain threshold to mitigate the risk of uncollectable debts resulting from leveraged trades that turn sour.

What is Crypto Leverage Trading?

Crypto leverage trading is a kind of  high-risk but high-reward strategy in the digital asset market. Crypto leverage trading usually refers to borrowing against your trading assets to amplify your trading positions. A leverage trade allows you control a larger amount of assets with a comparatively smaller initial investment amount.

Crypto trading platform provides leverage, enabling you to borrow funds. When engaging in leveraged crypto trading, interest is incurred, which ia calculated based on the overall position value. Consequently, leveraged trading in cryptocurrencies is best suited for short-term speculative purposes. Notably, the majority of crypto leverage products are traded through derivatives.

Typically, leverage is usually expressed as a ratio or using the “X” to signify the multiplier. For example, a leverage of 10X means you can open a position 10X the value of your initial deposit.  For example, if you have $1,000 in BTC on the platform, the maximum size of your trade with 10X leverage is $10,000. Some crypto leverage trading platforms like BTCC let you trade with much higher leverage of up to 100x or even 500x.

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How does Crypto Leverage Trading Work?

Leverage trading involves utilizing your crypto assets as collateral. Upon initiating a leveraged trade, you choose which assets you’ll use as collateral as well as the amount. The leverage ratio for each trade is determined at the time of execution.  You have the option to set your account to trade at predefined leverage levels or opt for a broker that permits you to adjust the leverage ratio on a trade-by-trade basis.

In the event of a profitable trade, the lifecycle remains similar regardless of whether leverage is employed.  For instance, in a leveraged trade, your profits are multiplied by the leverage ratio.  For a 5x leveraged trade, your profits would be five times higher compared to a non-leveraged trade, assuming the trade is profitable.

However, in the case of a loss-making trading, a range of new factors need to be considered.  Leverage amplifies both gains and losses. If you want to continue to hold a loss-making position, your broker may request you to increase your margin by depositing additional funds, a process known as a margin call. Failure to deposit additional funds may result in your broker reducing your position size to mitigate risk exposure, a practice referred to as a stop-out.

Risks and Benefits of Crypto Leverage Trading

While crypto leverage trading has the potential to significantly boost returns, it also entails considerable risks. Therefore, it is significant to possess a thorough understanding of the market and to proficiently manage risks when participating in crypto leverage trading.

The following chart sets forth the benefits and risks of crypto leverage trading:

How to Select the Best Crypto Leverage Trading Platform?

Selecting the best crypto leverage trading platform involves considering several key factors to ensure that the platform you choose meets your trading needs and preferences. Here are some detailed guidelines to help you make an informed decision:

• Platform Security: Security is paramount in crypto trading. Ensure the crypto platform employs robust security measures such as two-factor authentication, cold storage for funds, and regular security audits.  Check the platform’s historical performance and any past security incidents. A platform with a clean track record is more trustworthy.
• Leverage Options:  Different platforms provide varying maximum leverage levels. Choose a platform that provides leverage within your risk tolerance. For instance, some platforms like BTCC may offer up to 500x leverage, while others may be more conservative. Novice traders usually want to begin with smaller ratios, whilst seasoned traders may employ more leverage.
• Trading Fees: Trading fees can exert significant influence on your profits, especially with frequent day trading.  Therefore, analyze the platform’s fee structure, including trading fees, funding fees, and withdrawal fees. Look for platforms with competitive fees that align with your trading strategy.
• Cryptocurrency Support: The range of supported cryptocurrencies varies widely between platforms. Some focus on major coins like Bitcoin and Ethereum, while others offer a broader selection including altcoins. Select a platform that supports a wide range of cryptocurrencies to diversify your portfolio.
• User trading experience:  Choose a platform with a user-friendly and intuitive trading interface that suits your trading style. Besides, the platform’s execution speed and reliability during high market volatility are also important for a delightful crypto trading experience.
• Customer Support: Ensure the crypto leverage trading platform provides responsive customer support via multiple channels, such as live chat, email, and phone. Read user reviews to determine response times and level of service.

Best Cryptocurrency Leverage Trading Platforms for 2024

Below, we will dive in the top platforms for crypto trading with leverage in 2024.

Binance

Binance stands as our top-tier crypto platform for leverage trading. Since its inception in 2017, this exchange has swiftly ascended to become one of the largest in terms of trading volume, facilitating daily transactions exceeding $20 billion. The exchange boasts support for over 400 cryptocurrencies and offers a diverse range of trading options, encompassing perpetual futures contracts, margin trading, and options trading.

Binance provides 5x margin trading on more than 100 USDT trading pairs and offers 10x leverage on various BTC-based trading pairs. Additionally, the platform’s derivatives include quarterly and perpetual contracts, offering up to 50x leverage, as well as options trading. Notably, BTC futures allows up to 125x leverage, albeit with variations in maximum leverage based on margin type, whether cross or isolated.

One of Binance’s notable features is its competitive fee structure, with futures trading fees starting at a mere 0.2% for makers and 0.05% for takers, and even lower rates for high-volume traders and BNB holders. Furthermore, the platform boasts high liquidity, ensuring seamless order execution even amidst volatile market conditions.

MEXC

MEXC is rapidly gaining popularity among traders seeking advanced features and a vast array of cryptocurrencies. What distinguishes MEXC is its user-friendly design and extensive range of trading options – offering access to over 2,500 different cryptocurrencies across more than 3,000 trading pairs. Low trading fees enhance its appeal, but MEXC also stands out for its leverage crypto trading on over 100 assets, encompassing BTC, ETH, and a broad spectrum of altcoins.

MEXC utilizes perpetual futures (perps) to provide crypto market trading with leverage ranging from 5x to 200x. Popular trading pairs like BTC/USDT offer ample trading opportunities, while the platform also supports leveraged trades for trending meme coins such as PEPE, WIF, BONK, and FLOKI. Traders can take long or short positions and settle trades in USDT or the underlying cryptocurrency.

One of the most attractive aspects of MEXC is its zero-fee trading for futures-maker traders, with a fee schedule of 0% for makers and 0.01% for takers. This enables active traders to significantly reduce their transaction costs. Another compelling feature is MEXC doesn’t require KYC (Know Your Customer) checks for basic accounts, which is great for users who value their privacy.  However, if you want to withdraw larger amounts (more than 10 BTC per day), you’ll need to verify your identity.

BTCC (Most Recommended)

BTCC is the highest leverage trading platform among crypto exchanges with up to 500x leverage for BTC and ETH. Founded back in 2011, BTCC is one of the longest-serving crypto exchanges in existence in the world. Combining a user-friendly interface with up to 500x leverage on over 300 crypto assets, BTCC is dedicated to providing a trading platform that is fair and reliable in every sense.

One of BTCC’s standout features is its top-notch security. Since its inception, BTCC has weathered the ups and downs of numerous bull and bear markets without a single hack accident report, making it one of the most trusted exchange in operation.

BTCC’s leverage option supports up to 500x leverage in the futures market, making its an attractive platform for savvy investors looking for huge return. BTCC probably offers one of the lowest transaction fees in the industry – only 0.03% for every trade. Due to its high liquidity, reliability, ease of use, and security, BTCC has been regarded as one of the most popular crypto exchange in the world.

Conclusion

Leverage trading has the potential to generate substantial profits with a relatively modest investment. However, it is crucial to recognize that leverage can also amplify losses, making crypto leverage trading inherently more risky than non-leveraged trades.

In summary, the most reputable leverage trading platforms provide a variety of features tailored to meet the needs of different traders. For instance, Binance boasts high trading volumes, while MEXC offers an extensive selection of altcoins and competitive fees. BTCC, on the other hand, appeals to both novice and seasoned traders with its user-friendly interfaces and up to 500x leverage.

When selecting a platform, it is essential to consider factors such as leverage ratios, supported cryptocurrencies, fees, security measures, and user experience. Always prioritize responsible trading practices and have a thorough understanding of the risks associated with leverage.

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