Trading with leverage is a powerful tool for anyone who wants to maximize their earnings without big starting capital. With that, it can help you increase your gains by borrowing funds to magnify your position.
But with so many crypto exchanges out there offering leverage trading, how do you know which one to choose?
In this article, we’ll be comparing the biggest crypto exchanges and their leverage trading options so you can choose the right one and start trading like a pro.
The comparison will mainly be targeted around comparing the maximum leverage that cryptocurrency exchanges offer but also the fees and trading pairs available. Buckle up, and let’s find you the best crypto exchange for leverage trading.
How does Leverage in Trading Work
Leverage trading is a way of borrowing money from a broker or exchange to increase your trading position. It allows traders to increase their buying power and potentially magnify their profits.
For example, let’s say you have $1,000 that you want to use for trading and buy Bitcoin. When you use leverage, you could potentially borrow a certain multiple of your amount to increase your buying power.
In this case, 10x leverage would mean that you have $10,000 for your trading. Or with 25x leverage, you are borrowing 25 times the amount of the initial investment, etc.
However, leverage is a double-edged sword, apart from magnifying your profits, it can also magnify your losses.
With traditional investing, you can lose only as much as you put into the trade. But with leverage trading, you will use your initial investment, plus you are obliged to repay the amount borrowed, increased by interest or fees.
And as we’ve already hinted, trading with leverage also comes with fees, which are usually calculated as a given percentage of the borrowed amount, charged for each day your position is open.
What Exchanges we Chose to Compare
For this ultimate comparison, we chose to compare five exchanges. The list is mainly composed of the biggest exchanges ranked by CoinMarketCap.
This includes Binance, Coinbase, Kraken, KuCoin and Gate.io.
The idea behind this is simple. These exchanges are the ones you are likely to use when it comes to trading crypto with leverage.
Also, this list is not ranked by any means. All exchanges offer different perks and might be suitable for different trading styles.
With every exchange, we’ll be examining the same criteria. Because it would be unnecessarily extensive to explain each of the terms over and over again, here you can find the needed basic explanation that will help you understand the concepts better.
The highest amount of borrowed funds a trader can use to increase their position size.
Liquidation occurs, when your account balance falls bellow the maintanance margin level, which is the minimum amount required to keep a leveraged position open. At that point, your leveraged position is automatically closed and any remaininig funds in your account are used to cover the losses.
Borrow Daily Interest Rate
The interest rate charged by the exchange for borrowing funds. It is usually calculated by hour. If decide to repay only a portion of your position, interest is paid first.
Apart from interest, you’ll likely have to pay also other fees. This includes
- Trading fees; trading fees are usually the same as in the spot market. It’s the fee paid to buy that tokens.
- Management fees; fees paid to the exchange to keep your position open.
Binance is a cryptocurrency exchange that was founded in China in 2017 by Changpeng Zhao. It has since become one of the largest cryptocurrency exchanges in the world, offering a wide range of trading pairs and serving users all around the world.
However, Binance has also faced controversy in the past.
In 2019, the exchange suffered a major security breach where hackers stole over $40 million worth of Bitcoin from its hot wallet. But the exchange took the right path and compensated all its users.
Additionally, some governments have cracked down on Binance’s operations, with countries like the UK, Japan, and Canada issuing warnings or taking regulatory action against the exchange.
Binance Maximum Leverage and Margin Fees
With a quick overview of the history, let’s take a look at the leverage trading fees and features offered by Binance.
The maximum leverage available on Binance varies depending on the trading pair. Smaller coins and tokens usually have available leverage at around 20x, however, the maximum you can get is 125x for BTC/USDT trading pair.
However, the more capital you have, the less you can borrow. This makes sense since with $10,000,000 and 100x leverage, you would be borrowing 900 million dollars, which is simply not possible.
When it comes to liquidation threshold, on Binance you’ll get liquidated when your margin ration falls bellow 105%.
The daily interest rate on your borrowed funds varies a lot, depending on the token. For that reason, we’d recommend you check the borrowing interest for yourself on the Binance website.
But let’s say you would be borrowing BTC. In that case, the daily interest is 0.008257%.
And lastly, Binance doesn’t charge any extra fees for standard margin trading apart from the same trading fee as on the spot. However, if you decide to trade futures with margin, there are additional fees.
|Binance Maximum Leverage||Up to 125x, but depends on the trading pair|
|Borrow Daily Interest Rate||For BTC, it’s 0.008257%|
|Other Fees||No special fees for standard margin trading, however, futures come with additional fees.|
In summary, Binance offers traders up to 125x leverage on their trades, with margin rates averaging at 1%, and borrow daily interest rates around 0.01%. The exchange also charges a flat trading fee and withdrawal fees that vary by cryptocurrency.
Coinbase is a popular cryptocurrency exchange that was founded in 2012 and is based in San Francisco, California.
While Coinbase initially offered two versions of its platforms. Coinbase providing a user-friendly platform for anyone and Coinbase Pro for their advanced users, it has since expanded and merged the two versions together.
Coinbase introduced leverage trading only recently, in February 2020. They decided to take a reserved approach by only providing their users maximum leverage of 3x.
However, leveraged trading didn’t stay hot on Coinbase for long. Coinbase decided to disable margin trading only 9 months after, in November.
So, unfortunately, you are not able to trade with leverage on Coinbase.
Kraken is a US-based cryptocurrency exchange that was founded in 2011. It’s one of the oldest and most established cryptocurrency exchanges, offering a wide range of trading pairs and services for traders.
It wasn’t stealed from Kraken like from Binance, however in May 2017, Kraken was hit with DDos attack, leading to huge losses for market participants, who wasn’t able to complete their trades.
Maximum Leverage and Margin Fees on Kraken
Kraken has all the important information scattered all over their website, but we managed to find all the data we need.
Kraken offers only up to 5x leverage, but it’s offset by overal user-friendlines of their margin feature.
You can choose from over 100 trading, which almost all of them comes with a 0.02% opening fee. The exception is Bitcoin, with 0.01% and fiat currencies, with 0.015%.
The fee percentage is also the same when it comes to paying interest on the borrowed funds. However, this fee is not charged for the first four hours after opening a position.
And lastly, the margin liquiditation level is set to approximately 40%.
|Kraken Maximum Leverage||Up to 5x|
|Liquidation Level||Approximately 40%|
|Opening Fee||0.02% for almost every token|
|Borrow Daily Interest Rate||Same as opening fee, paid after the first four hours.|
KuCoin is a cryptocurrency exchange founded in 2017 that offers a variety of trading pairs and services for traders.
It has became extremely popular lately, since as one of a few excahnges, you can use and trade on KuCoin without completing KYC verification.
What is Maximum Leverage and Fees on KuCoin
Kucoin allows users to trade only with a maximum leverage of 10x, but unlike other exchanges, KuCoin has a long list of supported coins.
Liquidation happens when dept ratio reaches 97%.
Despite these risks, KuCoin offers attractive borrowing rates starting from as low as 0.02% per day, which can be appealing to traders looking to take advantage of leveraged trading opportunities.
|KuCoin Maximum Leverage||Up to 10x|
|Liquidation||97% dept ratio|
|Borrow Interest Rate||0.02% for almost every token|
|Other Fees||Standard trading fee of 0.1% is charged|
Gate.io is a cryptocurrency exchange founded in 2017 that offers a variety of trading pairs and services for traders. We mentioned Gate.io in a few of our previous articles, especially since it offers great interest rates on smaller coins.
But even gate.io don’t have completely saint past. Particularly in 2019 it was accused of artificially inflating its trading volume. However, the exchange denied these accusations.
Gate.io Maximum Leverage
Gate.io offers a maximum leverage of 100x. However, that’s only for futures trading. If you want to trade crypto with leverage, you can take advantage of a maximum of 10x leverage.
All borrowed funds at Gate.io are charged with a 0.02% daily interest rate and your positions will be liquidated onec margin level falls bellow 110%.
|Gate.io Maximum Leverage||Up to 100x for futures, but only 10x for standard margin|
|Borrow Interest Rate||Flat 0.02% for all borrows|
|Other Fees||Standard trading fee of 0.15%, but that’s easily reducible through promotions|
When it comes to margin trading, or trading with leverage, all exchanges usually charge about the same fees. However, differs a bit when it comes to the maximum leverage.
Now, let’s summarize our findings using a table.
In the end, it all comes down to your trading strategy. Although Binance offers significantly higher maximum leverage of 125x, it also has a bit higher interest rate. Other exchanges however, might only give you 10x leverage.