With traders moving from immediate trading to the exploitation of the leverage through the trading of margins or future contracts, they always ask themselves, “Who offers leverage?” This article aims to explain how to grant leverage in margin trading and future encryption contracts.
What is margin trading and how it works in cryptocurrencies?
Margin trading is the next step after immediate trading. When making a encrypted currency margin, you provide guarantees and offer you an additional money to buy the cryptocurrency or the distinctive symbol you want. In this case, we will use Bitcoin.
Suppose you have $ 100 and want to buy $ 1,000 of bitcoin. To complete the transaction, you need to borrow an additional $ 900. Various cryptocurrency exchanges operate on parallel markets where merchants who need additional money can borrow from other users. You can borrow 900 dollars from the market at a certain interest rate. Additional leverage is provided by a person who owns excess dollars and in return pay interest.
Your loan has a due date. Once it is expired, you must get another loan at a different interest rate, or close the situation. If you are planning to keep a crane to benefit for a long time, there are interest rate risks. If interest rates rise sharply, a large part of your net wealth (the initial amount of your assets) may be used to pay benefits, which may lead to the closure of your early position. Take the above numbers as an example – if you need to pay a fee of 1 % to borrow 900 dollars a day, you will pay the interest of 9 dollars per day. If the price remains the same, the value of a net value of $ 100 will disappear within 12 days.
Whether you are profitable or lose money, you must pay the loan. To ensure that you always have enough value to pay your loan, the stock exchange will set the maximum of the leverage. If you cut this minimum due to the loss in the place, the stock market will be closed automatically and the manager will be returned to the lender.
How does the leverage work in trading the encryption contracts?
Once you are aware of margin trading, the next step is to trade futures. Just like the trading of the cryptocurrency margin, it includes future leverage. However, unlike margin trading, you do not borrow money from other users. The leverage is determined by Excination Futures.
Below is an example of how the leverage works in Bitcoin Futures trading.
If you want to make a future contract worth 100 Bitcoins, the stock exchange will be asked to deposit a percentage of this amount – you will order Bitmex 1 Bitcoin or 1 % (except for fees), but each exchange will be different. Both long and short will bid 1 bitcoin.
Futures trading is a zero-game-you can only win the margin deposits of the loser. So if there are no other traders, the maximum your return will be 1 bitcoin or 1 %. Futures contracts are traded on separate books assigned, while margin trading is traded in expanded Exchang books. The task of exchanging futures (bitmex in this case) is the resistanceSufficient merchantsSo that the system has sufficient funds to allow the trading price of future contracts at any level.
In margin trading, your retaining period is determined according to the end of the loan. In futures trading, your maximum period is determined by the date of the expiry of the future contract. The ratio of the future contract rate to the basic instant price determines the price of the implicit interest. If you bought a future contract for one month for $ 32,000, but the instant price of Bitcoin is $ 30,000, you pay a 6.66 % money to borrow money. Through the future contract contract, you can learn the front rate in advance and this rate remains closed for the duration of the contract.
Future exchanges will determine the minimum purpose of the net custom that you must keep. If this threshold is broken, the stock exchange will close some or all its positions. They do this to ensure that there is sufficient net value to settle all unrestricted contracts when entitled. The more the financial lever granted by the stock exchange, the more difficult to ensure an organized settlement of the unlikely contracts.
Below is a schedule summarizing the margin and futures for cryptocurrencies
| Margin trading | Futures trading | |
| lever | Borrow | Determine the stock exchange |
| The risk of interest rate | Floating interest rate | Fixed interest rate |
| Request book | The spot of goods | Futures |
| The maximum contract period | It is determined by the date of the loan entitlement | It is determined by the date of the settlement of futures contracts |
We invite you to learn more about Bitmex treatmentClick hereVisit our growing educational portal that covers the transactions and the ecosystem of the encrypted currency.
As always, please pass dispute、cable and twitter Call us to start on our latest updates. We encourage you to check our blog regularly. Also, if you have any questions, please contact usCustomer service team。
