If you want to trade bitcoin with a leverage you might have to choose which exchange you want to use. You are at the right place to get the most unbiased information.
Disclaimer, yes I do get some compensation if you use my referral link, but I have referral links for all exchanges so I am not more incentivised to promote one over the other.
Small note, I also offer some instruction on how to leverage different funding rates on two exchanges to earn some bitcoin without risk.
What is leverage / margin trading?
I order to make the most out of smaller moves with the minimum deposit you need to have access to a margin exchange. The idea is that the exchange “lends” you a certain amount of BTC as a trade you can take. Your deposit acts as a security amount that can be used to cover possible losses. So for example, you deposit 1000$ worth of BTC which is roughly 0.1 BTC at this time (I hope some time in the future we will laugh to this cheap Bitcoin). If you want to trade a full Bitcoin, you are trading with a 10x leverage, this means that every 10% move either doubles your deposit or liquidates your account. It is crucial to understand that this is not an easy way to trade however lucrative it might seem. Never trade money that you cannot afford to lose and always start with a small amount so you can get familliar with everything.
Now to compare exchanges
I personally have used 4 exchanges that offer margin trading with leverage so I will be talking from personal experience.
Can you only trade Bitcoin or also other Crypto currencies, such as Ethereum, Litecoin and Ripple?
It is different from exchange to exchange but most of the offer more then just BTC margin trading.
You can usually trade at least Bitcoin and Ethereum, but some offer even more pairs, such as Ripple, ADA Cardano and others
From their website:
Deribit is live since June 2016 after several years of development. John Jansen, the original founder teamed up with Marius Jansen, Sebastian Smyczýnski and Andrew Yanovsky. Deribit started as a Bitcoin Futures and Options trading platform going live in the summer of 2016. We run our daily office from Amsterdam (The Netherlands).
I really like interface of Deribit exchange, it feels light and fast and it makes sense.
From their website:
BitMEX is a cryptocurrency exchange and derivative trading platform. It is owned and operated by HDR Global Trading Limited, which is registered in the Seychelles and has offices worldwide.
- BitMEX is a Peer-to-Peer Trading Platform that offers leveraged contracts that are bought and sold in Bitcoin.
- BitMEX only handles Bitcoin. All profit and loss is in Bitcoin, even if you’re buying and selling altcoin contracts. BitMEX does not handle fiat currency.
- BitMEX allows trading with a high amount of leverage.
BitMEX, was the first exchange that I used for leveraged trading so it has a special place in my heart. The exchange works nicely but is famous for becoming inaccessible during periods of high volatility. This is not generally such a problem if you have a plan and have set your orders at the time of opening the trade and if you are not over leveraged, however it can be painful if you want to manually adjust your trade and it is not possible due to technical issues.
From their website:
Binance is a global cryptocurrency exchange that provides a platform for trading more than 100 cryptocurrencies. Since early 2018, Binance is considered as the biggest cryptocurrency exchange in the world in terms of trading volume. In 2019, company announced Binance Jersey, an independent entity from its parent Binance.com exchange, with the aim to expand its European influence. Jersey based exchange offers fiat-to-cryptocurrency pairs, including the Euro and the British pound.
Binance is probably one of my favourite exchanges in terms of trading Altcoins, but they have just recently introduced margin trading so it is invite only currently and it is hard to get by an invite.
From their website:
Kraken is a US-based cryptocurrency exchange, founded in 2011. Kraken Digital Asset Exchange is one of the world’s largest and oldest bitcoin exchanges with the widest selection of digital assets and national currencies. Based in San Francisco with offices around the world, Kraken’s trading platform is consistently rated the best and most secure digital asset exchange by independent news media. The exchange provides cryptocurrency to fiat trading, and provides price information to Bloomberg Terminal.
Kraken is a vetted exchange and you can see that in their interface, I am aware that they are currently working on their new interface, but for now we still have to use the old interface, which is in my opinion one of the worst in the industry.
Which exchange would I recommend?
I personally used Deribit and Binance for leverage trading. I used BitMEX a lot but due to their insane high funding fees I stopped using the exchange. Their funding fee can go up to 0.5% per 8 hours during certain periods, I know this doesn’t sound like much, but it eats away a lot of your profit if you are holding a position for longer periods. 0.5% adds up to 1.5% a day so if you hold a position for 10 days you have to make 15% profit after all expenses just to break even. Considering that most hedge funds on the planet make less than that as a long term multi year average this is an insane amount of fees to pay. This is also the main reason why I am not recommending BitMEX.
How to make money with minimal risk trading BTC
If you read my post so far you are aware that in order to be able to trade with leverage you have to pay a funding fee for the privilege of trading with margin. Now different exchanges offer different funding fees, and a positive funding fee means that long positions pay a fee to the short position holders. Can you see where I am going with this now? If there is a big positive funding fee for example, you can open a short position on BitMEX and getting paid the funding fee while simultaneously opening a long position on Deribit, where the fee is lower so you earn the difference between their funding fees without being exposed to bitcoin movements as you have a long and short position open at the same time. The only thing you have to be careful about is that you have enough margin if bitcoin makes big moves so you don’t get liquidated on one account.