Margin

The collateral or initial investment required to open and maintain a leveraged trading position in digital asset markets, amplifying potential profits and losses.

What is Margin?

In digital asset trading, margin refers to the funds or collateral deposited by a trader to open a leveraged position, allowing them to borrow additional capital from an exchange or platform to amplify their trading capacity. For example, with a 10x leverage on a $1,000 margin, a trader can control a $10,000 position. This increases potential profits if the market moves in their favor but also heightens the risk of significant losses, including liquidation if the position moves against them and the margin falls below the maintenance threshold. Platforms like Binance, Kraken, or Bybit require margin to be held in assets like BTC or USDT, with varying leverage ratios (e.g., 3x to 100x).

Margin trading is prevalent in both centralized and decentralized exchanges (e.g., dYdX), with the latter using smart contracts to manage collateral. For instance, a trader might deposit ETH as margin to borrow USDT, betting on ETH’s price increase. If the price drops, the position may face a margin call, requiring additional funds, or liquidation, where the collateral is sold. Data from CryptoCompare shows margin trading accounts for over 20% of crypto exchange volume as of 2025, with high volatility driving its popularity. Discussions on X often warn of the risks, citing examples of liquidations during market crashes like March 2020, emphasizing the need for risk management tools like stop-loss orders.