What is Leverage in Cryptocurrency? How Can I Trade at 100X Leverage?
Crypto leverage is one of the most commonly discussed topics in crypto. But what are they really? In this guide, we take an in-depth look at it.
What is Crypto Leverage？
Margin is a fraction of the amount a trader requires as security to start a more prominent position. When trading, you can double the amount of positions called leverage. Thus, if a margin trader uses 100 times the leverage, their risk and possible profit can be increased by 100 times.
Leverage is a powerful tool for traders. You can use it to benefit from relatively small price fluctuations, provide larger position sizes for your portfolio, and grow your capital more quickly.
Leveraged trading is like margin trading.Margin is a small fraction of the amount a trader needs as security to start a more prominent position. When the transaction is in progress, if a trader uses 100 times the leverage, their risk and possible profit can be increased 100 times.
Different Bitcoin exchanges offer different levels of leverage. While some Bitcoin exchanges offer 200x leverage, enabling traders to create positions worth 200x their original deposit, other Bitcoin exchanges only provide 20x, 50x, or 100x leverage. A trade with 100:1x is called a 100x leverage trade.
What Happens When You Trade with Leverage?
When you trade with leverage, you are borrowing money from the market. Hypothesis the price of BTC is $10,000. You want the price to go up, and this time, you put in $50 with 100x leverage.
Now you are in the market with $50 x 100 = $5000 worth of contracts. It is attractive because if the price of BTC goes up, Your profit has also increased ten times.
But the same applies to your losses. Now, if the price of BTC drops from $10,000 to $9,000, in other words, the price drops by 10%, you may be in trouble.
Why? Because although you’ve only put $50 into the trade because you did so with 100x leverage, you are exposed to price movements with $5,000 worth of contracts.
A 10% drop for you, means your $5000 has now turned into 5000 x 0.9 = $4,500.In other words, you’ve lost $500 – or the actual amount you put into the trade.
It means you must exit the market.
Benefits of Using Leverage
- Expanded profits. You only need to invest a fraction of the value of the trade to make the same profit as any other regular trade on the exchange.
- Take advantage of opportunities. Using leverage frees up capital that can be used for other investments. The ability to increase the amount available for investment is called leverage.
- Profiting from market declines. Using leveraged products to speculate on market movements allows you to benefit from both down and up markets.
Risks of Using Leverage
Margin trading was, until recently, much more common in currency markets, as it was generally considered too risky to be used in highly volatile cryptocurrency markets.
Unlike regular trading, you can lose your entire initial investment margin trading. Further, the more you leverage, the quicker you can lose it. For example, if I go long on a 3:1 margin.
Margin trading is a type of leveraged trading. It’s means that I can deposit $100 into a margin account and get three times my buying power trading balance.
It’s also means that if I trade three times my balance ($300) and my position becomes -$100, I will lose everything I hold as collateral. I have made more money in a short period through margin trading than I have ever made in my entire life. And more money is lost than ever before.
Leverage increases risk and cryptocurrencies are more volatile than stocks and other traditional markets. However, recognizing the potential risk, the vvolatility of cryptocurrencies creates profits for traders, and in a shorter period, only a part of the investment can produce significantly high profits.
How Can I Trade at 100X Leverage?
Make an account on BTCC.
We offer margin trading with up to 100x leverage.
Keep in mind that high risk comes along with high reward. The price of Bitcoin goes up and down rapidly since it is a highly volatile asset. The leverage indeed multiplies your gains, but it can also compound your risks of potential losses if the market goes up when a sell/shot position is open or if the market goes down when a buy/long position is opend. You must be cautious about this risk because in some cases, the position will be liquidated, which will result in the loss of the funds you put into the position. It is why every trader must take risk management seriously. You must always take necessary initiatives like stop loss to avoid losing your money.