The digital asset market is a volatile sector where investors are always at risk of losing their money. Within crypto trading practices, some trends are more risky than others, such as: B. the purchase of an NFT in a spontaneous decision. Such a practice is known as “margin” or “leverage” trading in crypto assets. The term, which has been in widespread use for some time, recently hit the headlines after the Canadian government decided to ban margin trading, which is offered as a service to Canadian residents by local and international exchanges.
Margin trading, also known as leverage trading, allows clients to borrow capital from a broker to invest in crypto assets. The broker can be both an individual and a legal entity like a crypto exchange that offers the service.
This practice allows traders to access more funds than they initially have to bet with crypto Attachment. This capital is secured by a security.
Simply put, if a trader has Rs. 100 and the exchange used offers 10x margin for bitcoin trading, the trader can place an order of up to Rs. 1,000
While this can potentially lead to bigger wins, it also increases the risk of big losses.
Canada banned exchanges from offering margin trading for Canadians as part of its recently released rules aimed at protecting digital asset investors from financial risks.
Speaking to Gadgets 360, Rohas Nagpal, an Indian Blockchain Architect and author of the Crypto Playbook, stressed that engaging in the practice of margin trading is indeed extremely risky.
“Margin trading is very, very risky. If the value of crypto bought and traded with borrowed funds goes down, the trader must provide more money to the broker to keep the trade open. If the trader cannot deliver this, the trade will be liquidated at a loss. Since crypto is highly volatile, traders can incur huge losses,” Nagpal told Gadgets 360.
At a time when India is fighting for global rules for the crypto sector G20 PresidencyNagpal has advised the nation to follow Canada’s decision on exchanges offering margin trading.
“The Indian government should ban crypto exchanges from offering margin/leverage crypto trading as early as possible,” Nagpal noted.
binancethe biggest crypto exchange in the world, is one of many popular exchanges that offer margin trading services.
ByBit, octopus, KuCoinand Bitmex are also renowned crypto exchanges that offer the risky feature, Coinsutra had listed in a recent report.
Cryptocurrency is an unregulated digital currency, not legal tender and is subject to market risks. The information provided in this article is not intended to and does not constitute financial advice, trading advice, or any other advice or recommendation of any kind offered or endorsed by NDTV. NDTV is not responsible for any loss arising from any investment made on an accepted recommendation, forecast or other information contained in this article.
