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Is Crypto Margin Trading Profitable?

4min Read
Is Crypto Margin Trading Profitable?

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With the increasing cryptocurrency “long tail”, BTC EURO trading is on the rise. The challenge is that the average investor has limited cryptocurrencies. Therefore, if you are looking at making the most of your limited cryptocurrencies, then you might want to consider margin trading as an option. In fact, cryptocurrency exchanges the world over offer margin trading services.
However, be warned that margin trading is extremely high risk and not to be entered into lightly. If you are still interested in finding out more about margin trading and specifically, crypto margin trading, then first let’s start by understanding what margin trading is.
Margin Trading – What is it?

Margin Trading allows you to open your position with leverage. Leveraging is basically using borrowed money with which to trade. So, lenders loan you their coins to trade and they make their money from the interest they charge you for the coins you borrowed.
Leverage is usually expressed as a ratio. For example, if you have a 3:1 ratio, you can hold a position that is thrice the value of what you actually have. So, if you have say, €10,000 in your trading account, then you would be able to buy up to €30,000 worth of Bitcoin with the leverage ratio you have.
With margin trading you can even short sell , which is when you sell your cryptos in advance and then buy them back after the prices fall. Another way is by taking a long position, which means betting on the prices of cryptos going up. Other strategies you can employ for margin trading include speculating and hedging.
The Dangers of Margin Trading
When you use margin trading as a strategy, know that there are other costs also involved. You will need to pay the interest on the coins that you borrowed as well as fees when you open a position in the cryptocurrency exchange.
Now, crypto exchanges will only allow you to lose the maximum you have personally invested when you opened your position and not the amount you borrowed. So, if you are losing money in trading, the exchange will call in your trade as soon as you reach the price when you start losing the money you borrowed. At this point, the exchange will automatically close your position so that you cannot lose any more of the money you borrowed – you will only lose the money you invested.
For example, you put down €25 to open your position at a crypto exchange and then leverage 4:1 so that you borrow €75. This way you can buy €100 worth of Bitcoin. The condition is place is that no matter what you make or lose from margin trading, you will have to pay back the exchange €75 – plus fees.
So, Is Margin Trading with Cryptos Profitable?

Yes, margin trading in cryptocurrencies can be extremely profitable. However, there are a few considerations we need to keep in mind if we are to ensure that margin trading is profitable for us:

  • Interest Rates: You need to know the interest rate you are paying for borrowing a cryptocurrency. If you are paying too high an interest rate, then you might not make any kind of a profit. In margin trading, interest rates are calculated on a daily basis and all of that is added to the amount you will need to pay the exchange back for the money you borrowed. So calculate interest rates very carefully so you know exactly how much you have to pay back.
  • Margin Available for Trading: How much of a margin you get for trading will also impact your profits. The average leverage is about 3:1. Other margins used are 2:1, 3.33:1, 4:1 and even 1000:1. The general rule is that the higher the margin, the higher the profits – and also the risk.
  • Euro Value of Crypto Increasing or Decreasing: In crypto margin trading, just as the value of Bitcoin is calculated against the Euro, a trader’s profit or loss is calculated vis-à-vis the underlying coin – usually Bitcoin. This means that your profit or loss is linked to the price movements not only of the crypto you have invested in, but also to the price movements of the crypto that it is based on.

While crypto market trading can be hugely profitable, it is also extremely high risk. All this trading works on money being loaned to you. So, if the markets don’t work in your favour, you could end up losing a lot – maybe even ending up in debt.


Biraajmaan covers market trends of major cryptocurrencies. As a graduate in engineering, his interests lie in Blockchain technology. With over a year as a journalist, his articles focus on US and UK markets.
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