Increased usage and high reliability have resulted in cryptocurrencies becoming the preferred medium of exchange in an Internet age. It has resulted in several cryptocurrencies boasting of very high valuations. This also makes it a hot asset and from a trader’s perspective, it becomes an exciting opportunity. Currently, cryptocurrencies can be traded quite similar to conventional forex trading and there are multiple platforms that facilitate such exchange. But, before we proceed to these platforms, let us understand the concepts of Future Trading and Margin Trading.
It should be noted that Future Trading and Margin Trading are not exclusive to cryptocurrency. They are in fact borrowed from the traditional stock market and have universal applicability. In layman’s terms, Future Trading refers to an agreement to trade an asset at a pre-decided price. For example, you have ordered one tonne of aluminum for $2,000. In the days leading to the delivery, the price of aluminum jumps to $3,000 per tonne. However, the seller cannot change the price and incurs a loss of $1,000. This is because, at the time of placing the order, you and the seller agreed to transact at a pre-decided price for a fixed quantity of metal.
Similarly, Margin Trading refers to the use of borrowed funds to purchase and sell assets. Returning to the aluminum example, imagine that this time around there is an increase in the metal’s supply and the price drops to $1,000 per tonne. You want to take advantage of this price drop and plan to purchase 4 tonnes of the metal. However, you only have $2,000 and can purchase two tonnes. Hence, you have to borrow $2,000 from the bank to meet the deficit. This borrowed amount is called leverage. You are expected to return the leverage amount along with an interest to compensate the lender. By purchasing 4 tonnes of aluminum at $4,000 instead of $8,000, you have managed to make a profit by saving on the price drop! Thus, Margin Trading has a lot to do with the timing in order to reap the most benefits. Just like how you are liable to pay the bank back, Margin Traders are expected to pay back their investors irrespective of a profit or loss.
Applying the same principles to cryptocurrency, Margin Trading is proving to be the most profitable form of crypto trading despite the risks involved. Here you engage in trade using borrowed money, also known as leverage in order to make potentially higher capital gains. At the end of the trade, the borrower has to return the money to the lender with an interest.
This is one of the largest crypto-trading sites out there. Launched in 2014, this platform allows trade only in Bitcoin and conducts trades worth $45 billion on a monthly basis. High volume trade can be organized and it also allows one to take a 100x leverage credit to facilitate high stakes margin trading. However, this platform has high withdrawal fees and is not recommended to beginners.
Originally known as OKCoin, it donned the new name during the latter part of 2017. Currently, one can trade only in a limited set of cryptocurrencies and altcoins. Additionally, the withdrawal fees are relatively low. However, this platform is targeted exclusively towards the Chinese market, but there is a translated website available, which allows trade from across the globe.
This platform allows users to create anonymous accounts and engage in fast trading. Coupled with low fees and good security, Deribit can be your go-to option. However, this platform has restricted trading to the only Bitcoin and there are a few complaints when it comes to liquidating assets.
This platform is recognized by the government of Japan. One can trade in over 15 leading cryptocurrencies and accept payments in fiat currency. However, its customer support is a huge letdown.
BitBay has a user-friendly interface and the registration process is quite simple. They use two-factor authentication and use cold wallets to store cryptocurrencies. Additionally, this platform also has a mobile app. Unfortunately, it engages in only a limited amount of coins and has a variable fee on withdrawal.
2019 will be the year of crypto trading as experts speculate the cryptocurrency market to hit a valuation of $1 trillion during the course of the year. This makes margin trading an exciting activity as there are huge rewards involved. Meanwhile, future tradings is an equally attractive option for people who prefer low-risk investments. As the crypto trading volume increases and other key institutional players enter the arena, there is a growing need for more reliable platforms that allow cryptocurrency exchange. Blockchain App Factory is a leading company that provides end to end solutions when it comes to developing white label cryptocurrency exchanges that are secure, user-friendly and efficient.