Crypto margin and leverage trading in the USA is somewhat of a mystery due to regulations and other factors that block traders from accessing this type of trading. This guide is meant to explain all the things you need to know about margin trading crypto laws in the US, how to get started, what are the fees, what some of the most common risks are, how to calculate your profit and losses, and how do you find a trusted exchange that offers crypto margin to US traders?
If you are a crypto trader from the USA and are interested in crypto margin or leverage trading then keep reading. After reading this article, you will know the basic concepts when it comes to all things about margin trading bitcoin and other cryptocurrencies in the United States.
We will discuss the different levels of leverage, the costs of actually trading on an exchange, the main laws/regulations, and I will also hint at some of the risks associated with this kind of trading. We will discuss the safe way of trading crypto with margin, what you need to know to sign up on an exchange, make a deposit, and how to make your first trade. Always use your top crypto margin trading strategy when entering the market.
- What is margin trading in crypto?
- Common questions from traders
- How to calculate position size and profits with leverage
- Can you trade crypto with margin in the US?
- How to start trading crypto on margin for US traders
- Best crypto margin platforms in the USA
- Different levels of margin and leverage explained
- What are the costs/fees?
- Laws and regulations in the USA
- What are the risks?
What is margin trading in crypto in USA?
The easiest way to explain margin trading in crypto is that you are borrowing money from your exchange to be able to trade bigger positions. For example, if your account size is $1000 and you trade with a x10 margin, your biggest position size would now be $1000 x 10 = $10,000.
If you trade with x100 margin, your biggest position size would be $1000 x 100 = $100,000. In short, margin or leverage is a multiplier that allows you to trade with more money than you have deposited in your account.
How it works is pretty simple. Your cryptocurrency exchange lends you money to trade with and in return, they get a bigger profit from your trading fees. When you make a profit you get to keep all the gains and when you lose you have to pay up for your loss. Profits and losses will also be multiplied by the margin you choose.
For example, if you buy bitcoin with a x10 margin and it makes a 5% gain during the night, your position would make 5% x 10 = 50%. If you buy bitcoin with x100 leverage and the same thing happens, bitcoin makes a 5% gain during the night, your profit would be 5% x 100 = 500%. As you can see, margin or leverage makes things bigger depending on the level of leverage you choose.
Be careful though, leverage trading works the same way when you lose money. A position with x10 leverage that would normally lose 2% overnight will now lose 20%.
This is the basic concept of margin trading for cryptocurrencies and it is all you need to know to figure things out. To make things even more clear, I have included a table for you to make your calculations.
What other traders from the USA ask
Yes, you can. Some exchanges and platforms located in the USA offer leverage for US traders. For example, BitMart.US is an example of a regulated exchange that offers margin trading for US customers. Other platforms outside of the United States are BitYard, CEX.IO, and Gate.io.
My advice would be to trade the coin that you are most familiar with. You need to know some characteristic technical patterns in the chart and also know the story behind the fundamentals to be able to make accurate price predictions.
In this guide, we recommend one regulated platform that offers leverage for US traders. This exchange is BitMart. It is located in the United States and has a license with the Financial Crimes and Enforcement Network.
The fees always stay the same no matter how much margin you use for one single position. If you are trading on a platform with 0.25% fees you will still pay the same percentage but in a bigger position. What makes things cost more is the actual position size. For example, if you have a 0.25% trading fee on a $1000 position you will pay $2,5. Now, if you use x10 margin on the same platform and open a position of $10,000 you will still pay 0.25% but this time the actual fee would be $25.
The leverage trading scene is in a grey area in the USA where CFDs are completely banned. Crypto margin trading is offered by only a few platforms that have acquired a Money Service License (MSB) through the Financial Crimes Enforcement Network (FinCEN). Since cryptocurrencies are regulated differently in the US we have not yet seen a hard rule on leverage trading. The SEC in the United States considers digital assets to be securities, while the CFTC sees them as commodities. The taxation and regulation will therefore be different and it is not yet 100% clear in which direction the regulatory bodies in the country will go.
In this guide, the platform with the highest leverage for traders in the USA is Bityard with maximum crypto leverage of x200.
It is very straightforward, take your full position size and deduce the losses. For example, if your account size is $1000 and you use x20 leverage your maximum position size would be $20,000. Now, let’s say that you lose 2% on this position size of $20,000, your total loss would be $400. The same calculation goes for your profits.
The loss is always calculated on your position size. It doesn’t matter how much leverage you use it is always the open position size that is calculated.
How to calculate the biggest position size and profits with margin
This table indicates the maximum position size you can take with different account sizes from $500, $1000, $5000, and $10,000. We will take a look at the difference between leverage from x5 to x200. This table shows how much capital you will be able to control in active positions in the crypto market.
Maximum position size
|Account size||x5 margin||x10||x20||x50||x100||x200|
5% profit with different margin
In this table, we calculate the potential profits of a 5% gain with the same position sizes and the same levels of leverage. Take extra notice of how the profits scale up when using higher leverage. I do want to point out that the higher leverage you use the riskier you trade will be. The profits you see in this table are what you keep when you close out the trade.
|5% profit on||0 margin||x5||x10||x20||x50||x100||x200|
25% profit with different margin
Now we take a look at the potential profit of a position that makes a 25% gain with the same position sizes and the same levels of leverage. You will see how the bigger gains get amplified by higher levels of leverage. You keep all the profits you see in the table below.
|25% profit on||0 margin||x5||x10||x20||x50||x100||x200|
When we calculate the potential profits earned from trading cryptocurrencies with leverage it’s obvious that the numbers get more interesting the more leverage we use. This is also a key factor to why it has become so popular.
It is possible to earn a lot of money by trading digital assets with leverage and if you do it the right way you can earn more than you expect overnight. Remember to always use a stop loss or trailing stop loss when engaging in leverage trading. Read our guide on cryptocurrency exchanges with stop loss for more information about platforms that offer great order types.
Is it possible to margin trade crypto in the US?
The most common question we see when searching the web is “can you leverage trade crypto in the US?“. The answer to this is a straight yes, however, it is not as easy as it is for other countries. The reason why we see so few exchanges with leverage in the US is the fact that the regulators have been very strict and don’t allow everyone to offer leveraged derivative products.
Some exchanges with a FinCEN Money Service Business license can offer margin derivatives products such as BitMart, but the number of exchanges is not at a staggering amount.
It takes hard scrutiny from the exchange to be able to acquire an MSB license from the regulators and for many platform owners, it is not worth the hassle. In many cases, they look to open an off-shore exchange where the regulators are more laid back and have fewer hurdles to pass.
So, to sum up, you can trade digital assets in the United States but you need to know which exchange offers the right product under the right regulation. Please adhere to the list of the best crypto margin exchanges in the USA further down in this guide where we highlight our top picks.
How to trade crypto on margin and leverage in the USA
This is going to be a quick guide on how to start trading digital assets with leverage for US traders.
- Sign up with any of the platforms in our list below.
- Follow the KYC process and send in your documents.
- After getting verified, located the Derivatives or Futures products in the main menu.
- Choose the cryptocurrency you want to trade.
- Select the leverage you want to trade.
- Enter your position size.
- Click Buy/Long or Sell/Short to open your position.
That’s it! You have now opened a leveraged position. Make sure that you use your stop loss to protect your downside when buying coins with leverage. The cryptocurrency market is very volatile and a stop loss is the best way of protecting your downside risk. Also, see our full guide on the best crypto margin trading exchanges.
Best crypto margin platforms in the US
- Established 2019 Singapore
- Type Cryptocurrency Exchange
- Currencies USD, CNY, VND, EUR, HKD, JPY, IDR, KRW, RUB, BRL, THB, GBP, PHP, SGD, INR…
- Funding Visa, Mastercard, Bank transfer, PayId, Osko, SEPA, Sofort, Klarna, Interac…
- Languages Mandarin (Chinese), Russian, Vietnamese, Korean, Japanese, Portuguese, Indonesian (Bahasa Indonesia)
- Restricted countries China, Korea, Democratic People”s Republic of, Pakistan
- Copy Trading
- Welcome Bonus
- Leverage Trading
- Buy Cryptocurrency
- High Security
- Quick Registration
• Very intuitive copy trading platform
• A regulated digital asset platform that offers leverage trading
• Available in the US
• No contact phone number
• Lacking a good news source
• Missing cold storage wallet
- Established 2017 United States
- Type Cryptocurrency Exchange
- Currencies USD, EUR, CAD
- Funding Visa, Mastercard, Apple Pay, Cryptocurrency, PayPal, Bank transfer, Gift Card
- Languages English
- Restricted countries Afghanistan, Belarus, China, Cuba, Congo, Iran, Islamic Republic of, Iraq…
- Advanced Trading Platform
- High Security
- Earn Cryptocurrency
- OTC Market
- Buy Cryptocurrency
• Advanced interface for active crypto-traders
• Offers great OTC solutions
• Regulated in the USA by FinCEN
• Relatively new platform
• Not very beginner-friendly
• The website is lacking a market news source
- Established 2013 United Kingdom
- Type Cryptocurrency Exchange
- Currencies USD, EUR, GBP, RUB
- Funding Visa, Mastercard, SWIFT, Faster Payment System (FPS), SEPA, QIWI, Skrill…
- Languages English, Russian, Mandarin (Chinese), Italian, Portuguese, Spanish
- Restricted countries Afghanistan, Bosnia and Herzegovina, Burundi, Central African Republic, Cuba, Korea…
- Products Cryptocurrency, Forex, Stocks, Metals
- Trading platforms Webtrader, Own trading platform Windows + Mac, Tradingview
- Devices Desktop, Smartphone, Web, Tablet
- Max leverage 100
- Order types MO – Market Order, LO – Limit Order, SL –…
- Support Phone Number, Live Chat
- Buy Cryptocurrency
- Veteran Trading Platform
- Fiat Account
- Beginner Friendly
- Margin Trading
• Very easy to use for beginner crypto investors and traders
• Regulated cryptocurrency exchange for extra security and trustworthiness
• CEX.IO is a veteran exchange that has been live since 2013
• Very poor trading interface for day traders and scalpers
• Low-quality customer support
• Few fiat currencies accepted
- Products Cryptocurrency, Futures, ETF, Options
- Trading platforms Tradingview, Webtrader, Mobile App Android + Mac
- Devices Tablet, Desktop, Smartphone, Web
- Max leverage 10
- Order types LO – Limit Order, MO – Market Order, SO –…
- Support Email, Live Chat, Contact Form
- Copy Trading
- Investment Product
- Trading Strategies
• Offers several tradable asset classes
• Has a lot of different utility for crypto enthusiasts
• Great for both investing and day trading
• Very slow live chat with a long queue
• Relatively new platform without a strong reputation
BitYard is a Singapore-based crypto derivatives platform that allows US traders on the platform. What makes this exchange great for investors in the USA is the fact that they are regulated in the United States as a Money Service Business (MSB) by the Financial Crimes Enforcement Network (FinCEN).
This cements the trustworthiness of the platform and combining that with the high leverage, low fees, and several hundreds of altcoins makes it a great trading platform for margin traders. This is also an exchange that allows shorting bitcoin and crypto which makes it possible for traders and investors to bet on a declining market.
Margin on BitYard
Margin trading fees on BitYard
BitMart is a US-based cryptocurrency exchange and is regulated by FinCEN as a Money Service Business. BitMart offers short-selling and trading in over 370 digital assets with some of the lowest fees on the market.
The exchange was launched in 2017 just before the bitcoin bubble went parabolic and it has grown in population since then. Some special features on BitMart that stand out to us are the high security, OTC market, staking, advanced trading interface, and the option to buy cryptocurrencies with fiat money.
Through the margin platform, BitMart offers all traders to trade altcoins with leverage with high ratios of up to 125x multiplier.
Margin on BitMart
Margin trading fees on BitMart
CEX.IO is a UK-based exchange for cryptocurrency trading that has acquired a Money Service Business regulation with FinCEN in the United States. The exchange is also regulated with FINTRAC in Canada and GFSC in Gibraltar.
This increases the trustworthiness of the company and it is one of our top recommendations for traders looking to trade cryptocurrencies with leverage in the USA. Some of the most important features on the platform are a fiat account, the option to buy crypto with fiat money, beginner-friendly, staking, high limits, and several different products.
Margin on CEX.IO
Margin trading fees on CEX.IO
Gate.io is our last recommendation and it is a cryptocurrency exchange based in the Cayman Islands that allows traders from the United States to trade on the platform except for traders coming from New York and Washington.
Gate.io is a non-regulated platform but it is a trustworthy exchange based on many factors such as reputation and great security protocols. Traders can enjoy promotions, crypto lending, dollar-cost averaging for crypto, demo trading, cold storage wallets, complex order types, Tradinview charts, and several different tradable instruments for digital assets.
Margin on Gate.io
Margin trading fees on Gate.io
Different levels of margin and leverage explained
When reading about different levels of margin on cryptocurrency exchanges you often see something like this 1:100, 1:250, or even 5:250. The first example 1:100 is the same thing as saying that they offer leverage from x1 to x100. When you see 5:250, it means that they offer margin from x5 to x250 and the number is the multiplier that you get on your capital.
For example, if you open a position with x5 you will be able to open a position 5 times bigger than you normally would, with the help of leverage. If you open a position with x250 you are using 250 times more capital than you have in your account. I want to try to explain the different levels so that you get a better understanding of the concept and also choose how much you want to use when trading and I will do this by using the stop loss method.
When trading with borrowed capital you get more buying power or shorting power, than you otherwise would have. In other words, your position size gets heavier than your actual account size and when the market moves, your position moves exponentially.
Below is a table showing you how much room you have to your liquidation level, or, the leverage stop out level where your position reaches a certain amount of loss that your account can’t support.
We are going to use an account size of $2000 for simplicity reasons and we will use different levels of leverage to see how much the market can go against you before you lose all your capital.
Liquidation points for different levels of leverage
|Position size = $2000||0 margin||x2||x5||x10||x20||x50||x100||x200|
|Explanation||With 0 leverage you can never get liquidated||At x2 you will get liquidated if the market goes 50% against you.||At x5 you will get liquidated if the market goes 20% against you.||At x10 you will get liquidated if the market goes 1% against you.||At x20 you will get liquidated if the market goes 0.50% against you.||At x50 you will get liquidated if the market goes 0.20% against you.||At x100 you will get liquidated if the market goes 0.10% against you.||At x200 you will get liquidated if the market goes 0.05% against you.|
I highly recommend new traders to not use more than x2 or x5 leverage when starting out due to high risks of liquidation.
The more leverage you use the tighter your liquidation point will get. At x2 you are doubling your position size and the new liquidation point is at 50%, that is common sense it is easy to understand.
The more leverage you use the smaller your margin to your liquidation gets and at x10 or more you have 1% or less to work with. Only traders with enough experience in short-term trading should trade at higher levels.
How to protect yourself against liquidation
The absolute best way to protect yourself against having your position liquidated is to use a stop loss. Many crypto trading platforms offer this order type and it gives you the flexibility to add a protective stop at a certain level below your entry price where you are no longer in danger of getting liquidated.
Fees for trading crypto on margin in the US explained
Low trading fees are a must for any trader who is going to trade digital assets with leverage, why is that? Well, let me explain how the fees work for margin traders and why you want to find a low-fee crypto platform.
The basic concept is that you always pay the trading fee on your full position size, for example, if you open a position of $10,000 and the trading fee is 0.20% you will pay $20. Now, if you use x20 margin and open a position that is 20 times bigger, $200,000, you will still pay 0.20% on the full position size which would be $400.
To demonstrate this in an easy-to-read format I’ve created a table below. Take note of how expensive it gets as you increase the leverage and how important it is to use a platform with very low fees. I have created three different examples of trading fees (0.10%, 0.25%, 0.50%) with different levels of leverage for traders with an account size of $500, $1000, $5000, and $10,000.
0.10% margin trading fee
|0.10% fee of||0 leverage||x5||x10||x20||x50||x100||x200|
0.25% margin trading fee
|0.25% fee of||0 leverage||x5||x10||x20||x50||x100||x200|
0.50% margin trading fee
|0.50% fee of||0 leverage||x5||x10||x20||x50||x100||x200|
It is not recommended to trade digital assets with a leverage higher than x5 if you don’t have the right experience or education in leveraged products. Higher margin can lead to very high trading fees.
These tables do a great job of demonstrating the importance of using an exchange with as low fees as possible. Leveraged trading is truly a double-edged sword where you stand to make half a fortune in a short time when timing the market right but it also eats your account slowly if you are using the wrong broker.
When trading with a margin of x200 or more you need to find an exchange with a lower fee than 0.50% otherwise you will eat up your entire capital on the first trade.
Crypto margin trading laws and regulations in the USA
The biggest question we see among US traders is “is crypto trading illegal in the USA?” and the answer to that is not at all clear yet. Why is there no direct answer to this simple question for US traders?
Let me explain.
If the exchange is not properly regulated it is illegal to promote derivatives products, and this is why it is so difficult to find an honest platform that offers margin trading for cryptocurrencies.
To be able to offer leveraged derivatives products in the United States you first need to be regulated as a Money Service Business (MSB) by the Financial Crimes Enforcement Network (FinCEN).
When filing for an MSB approval certain things must be in check to receive the license, for example, the platform needs to have a know your customer (KYC) system that tags all customers and their identities.
The exchange has to comply with anti-money laundering (AML) and combat the financing of terrorism (CFT) acts. There are several regulatory bodies in the United States, for example, the Securities and Exchange Commission (SEC) which regards cryptocurrencies such as bitcoin as a security, and the Commodities and Futures Trading Commission (CFTC) sees digital assets as commodities.
This creates some barriers that are yet to be taken down before we can see a clear regulatory landscape in the country. Until the regulatory bodies have agreed on how to regulate digital assets, US traders will stay in the gray zone with only a few platforms to turn to when it comes to trading cryptocurrencies on margin.
Risks with margin trading explained
All trading is risky but margin trading is especially risky since you control more money than you own and your liquidation point is closer to your open price than normal. Below are some key risks to consider before starting. These may be different for different traders.
- Significant risk of losing money – This is the obvious one and it goes without saying that you can lose all your money.
- Losing more money than you own – Always check that your broker or exchange has a negative balance protection before you start trading, meaning, the exchange will not let your account size go below zero and into minus territory where you now owe the trading platform money.
- Uninformed decisions – Bad trades happen all the time but it is more common in the world of leverage trading because many traders don’t understand how it truly works. Before starting out, we recommend that you spend some time researching if this style of investing really is for you.
- Using a fraudulent platform – Be aware of bad actors when choosing a platform, especially those without government regulation. Unregulated platforms can do anything they want with your capital and account such as close it down, stop withdrawals, and freeze funds.
- Short-selling – When trading on margin you open up the option for short-selling. This is a bet in the negative direction and your position will lose if the market trends are up. Since the market can move up indefinitely, your short position is at high risk of getting liquidated if the market keeps going up. Make sure you understand how short-selling works before you start.
- Liquidation – A liquidation happens when your position has lost too much and your account capital can’t cover the open loss. When your position gets liquidated you lose all the money connected to that trade and in some cases also your full account.
- Unexpected fees – Leveraged platforms can often att extra fees such as a Roll Over fee, also called an overnight fee. This fee is what you pay for using the extra funds lent to you by the platform. Other fees might also occur so make sure you read the fine print before you start.
This style of investing comes with certain risks that you can avoid simply by choosing a trusted and safe crypto exchange, educating yourself before starting, and don’t trade with more money than you can afford to lose. Find some of the most reputable exchanges in the list above.
Conclusion: Should you trade digital assets on margin?
This guide is a helpful tool for anyone looking to start invest in bitcoin or other altcoins with leverage. You will learn the most important aspects such as what margin trading is, how to calculate profits, losses, and maximum position size, laws on cryptocurrency leverage trading in the US, the best margin crypto exchanges in the USA, different levels of leverage, fees while trading with leverage, and all the common risks.
If you are looking for a way to scale up your trading and are aware of all the risks associated with cryptocurrency margin trading you should give it a try. Inexperienced traders should start small to learn how it truly works before they add to the size of their positions.
Investing with crypto and leverage can increase profits and losses, therefore I recommend you always use a stop loss to protect your downside. If you plan on trading bitcoin but don’t own any BTC yet, consider our guide on the cheapest ways to get bitcoin before starting. Good luck!