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TLDR
Leverage trading in cryptocurrency allows investors to borrow money from a brokerage to invest more in the crypto market than the initial investment capital they have available. By taking out credit, investors can invest larger amounts and earn bigger returns when they hit, even with modest equity capital.
However, unlike regular trading, leveraging crypto trading is also associated with high risk as the potential for loss is also accelerated. Many online brokers offer leverage for cryptocurrency, with some offering leverage up to (1:400).
While trading or borrowing money to buy cryptocurrency may sound profitable, it is important to know the risks involved before embarking on margin or leverage trading in crypto. Reliable and safe brokers offering cryptocurrency leverage trading include Binance, Kucoin, eToro, and Plus500.
A quick explanation about leverage trading
A beloved child has many names; you will find leverage as gearing, margin trading, share credit, borrowed capital, or leverage. In both long positions and short positions, leverage is investing borrowed money.
Several players offer leverage trading accounts with cryptocurrency. It must be noted here that an extreme risk is associated with this.
What is leverage?
Leveraging an investment means borrowing money from your brokerage to be able to get more funds and invest a more significant amount than you have available. By taking out credit, you will have more capital to invest in large amounts and get a correspondingly large return when you hit, even with relatively no risk management and modest equity capital. We state the leverage as a ratio, e.g., (1:10).
If you have USD 1,000 in equity and invest it in an altcoin whose value is USD 100 with a margin call and a leverage ratio of (1:10), you invest USD 10,000. If the share price rises 10% from USD 100 to USD 110, you would have earned potential profits of (10*10) USD 100, but since you made use of the buying power of margin trading and could buy ten times more share A, you instead earn potential profits of (10*100) USD 1000.
It is easy to see how leverage in crypto trading can be alluring to many. The ordinary man in the street usually has little equity to invest in crypto leverage trading. Then, leveraging their funds is often the only way to earn massive leverage in crypto trading. Some online brokers offer leverage up to (1:400)! Then you can invest USD 40,000 even with only USD 100 in equity. For cryptocurrency, this is not recommended.
The risk from margin trading and leverage
As most of us know, return and risk go hand in hand. Marginal trading gives accelerated profit when you hit. Still, it also provides a correspondingly accelerated loss for many traders when the market moves and goes wrong.
If we look at the example above but let the cryptocurrency drop by only 10% to USD 90, you have suddenly lost more funds than the entire trading capital you invested. You will owe more money than the original initial capital investment if the share price falls higher.
There is, therefore, considerable risk associated with high-leverage trading. One should be aware of the choices one makes before embarking on margin trading.
Many online brokers will not hold you responsible for significant losses for an amount more significant than your investment account with borrowed funds from a given online broker. This helps protect you against uncontrolled losses when you trade with leverage. Suppose you reach the limits where the loss equals the available starting capita for leverage trade. In that case, your position will usually be closed immediately, and the loss will be realized.
Where can I trade on leverage?
Several solid online brokers offer. Below, we list a couple of them. All the players mentioned here are reliable, safe, strictly regulated companies where your investments are completely secure.
NB! Although borrowing money to trade cryptocurrencies or borrow funds to buy crypto in a higher volume of crypto markets may sound profitable, beware. Only take out consumer loans or other loans within what the investment platforms offer.
Binance
Binance is the most popular trading platform for margin trading and has the highest margin trading liquidity.
Binance Futures investors trade with up to 125x margin and choose any leverage from 125:1 to 1:1 for BTC/USDT contracts.
At Binance, you can find more than 100+ popular cryptocurrency pairs.
Most Used
More details
Binance, a leading global crypto exchange, offers a user-friendly interface and low fees for trading a diverse range of coins. Accessible to both institutional and individual investors, it supports advanced trading services, although U.S. options are somewhat limited.
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Industry's lowest trading fees.
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Advance trading options like leverage.
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350+ trading options, 150+ for theUS.
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Lucrative on-site staking options.
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Hiccups in account verification.
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Less regulated than some competitors.
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The corporate structure is not transparently.
Kucoin
Kucoin is a cryptocurrency exchange that offers margin trading on various digital assets. It offers all the most popular cryptocurrency pairs and has more than 60+ cryptocurrencies. Kucoin is not a recommended crypto exchange to put trade funds on for people from the US.
More details
Kucoin stands out among other crypto exchanges due to its impressive span of 1100 markets and 600 digital currencies. This, coupled with a user-friendly interface and secure investment environment, has made Kucoin an increasingly popular choice. However, US customers can not use the trading platform.
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Ability to earn interest on crypto.
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Low fees.
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Good customer service.
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Volume discounts on fees.
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Features like margin and futures trading.
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Not licensed in the U.S.
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Lack of investment programs.
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Low trading volume.
eToro
A popular online broker. It is based on a social platform where users can see what trades everyone else is doing. You can even set your settings to automatically copy the users with the best returns. The field is passionately discussed, and there is much to learn here.
Etoro offers trading with the following cryptocurrencies: BCH, BTC, DASH, ETC, ETH, LTC, XRP, and 35+ others.
Best in class
More details
eToro is a popular online trading platform for crypto assets, stocks, and ETFs, featuring low fees and a user-friendly interface. With a free eToro wallet and social features like messaging boards, users can copy experienced traders and access numerous assets. Take a look at what makes this platform perfect for starting your trading journey.
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Provides an attractive, communal atmosphere.
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Offers zero commission on ETFs.
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Extensive selection of educational resources.
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Mobile app with trading features.
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Smooth account opening and bank transfer.
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Limited number of cryptocurrencies.
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Limited customer support.
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No crypto-to-crypto trading pairs.
Plus500
One of Europe’s by far largest online brokers. If you have a Plus500 trading account, you can trade CFDs on underlying financial instruments such as Forex, ETFs, options, commodities, currency, shares, and funds. They give you a gearing of up to 1:30.
Plus500 has a well-developed trading platform for browsers, desktops, and smartphones. They offer leverage and various trading strategies, options, and analysis tools.
Plus500 offers trading with the following cryptocurrencies: Ethereum, Bitcoin, Litecoin, Stellar, Bitcoin Cash, Cardano, NEO, EOS, IOTA, Solana, VeChain, Polygon, Axie Infinity, Polkadot, Uniswap, Filecoin, and Chainlink.
More details
Plus500 is an ideal choice for investors and traders, offering a user-friendly platform and a top-notch mobile app. The account opening process is simple, providing access to CFDs, margin trading, multiple payment options, and multi-asset trading. Regulated with a capital markets services license, Plus500 excels in education through its trading academy.
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Easy-to-use platform.
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It is well-regulated globally.
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An extensive selection of equities and options.
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Guaranteed stop-loss order.
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Robust risk management tools
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You get average research tools.
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Lower leverage for retail investor accounts.
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Not available in the United States.
Note: 80.6% of private investment accounts lose money by trading CFDs with this provider.
Summary
Leverage trading lets investors borrow money to invest more in the crypto market than they have. It can lead to bigger returns but also involves higher risks. The Most popular and safe brokers for crypto leverage trading include Binance, Kucoin, eToro, and Plus500.
Leverage trading means borrowing money from a broker to invest more than what’s available. This can lead to bigger returns but also higher risks. Some brokers offer leverage up to 1:400, which is not recommended for crypto.
A leverage ratio between 2:1 and 5:1 is recommended, as it balances potential returns and risk rather than using higher leverage ratios.
High-leverage trading has considerable risk, and investors should know their choices before starting. Many brokers protect investors from losses greater than their account balance. Platforms like Binance, Kucoin, eToro, and Plus500 offer leverage trading, but always remember the risks involved.
What is leverage in trading? Leverage in trading allows you to open a position with a value significantly greater than the amount you initially deposit. For instance, you may have the opportunity to amplify your position size by 5, 10, 20, or even 33 times the sum of your initial investment.
For instance, if you have $5,000 in your account and you open a $50,000 position (equal to one standard lot), you will be trading with a 10 times leverage on your account (50,000/50,000).
A 20x leverage means that you can open a position worth 20 times the amount of your initial deposit. In this case, your trading power is significantly magnified, allowing you to control a much larger position with a smaller amount of capital.
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