Blockchain technology has proven to be a transformative force and its disruptive influence holds the potential to elevate multiple sectors, including trading. It must be stressed here that several countries have already implemented or are approaching to implement blockchain technology in the trading market. For the traditional stock trading sector, blockchain can speed up processing, prevent fraudulent manipulation of trading data, and also establish more credibility through transparency. Likewise, the blockchain technology holds the power to do wonders for cryptocurrency leverage trading, especially through its “transparency” attribute. Read more about how does crypto leverage trading work at Multibank.io.
How would crypto leverage trading benefit from blockchain?
Before getting into that discussion, let’s have a basic idea about blockchain and how it achieves transparency.
Well, essentially, blockchain is a permissionless public shared ledger or database. One of the major features of permissionless blockchain is that it allows complete transparency of all data stored in its database- except those that have been protected through private keys.
Another major feature of permissionless blockchain is decentralization. It means, the blockchain ledger is never under the control of any single centralized authority. As a result, no single authority can decide on the disclosure level of data stored on a blockchain database. The decentralization aspect is one of the major factors that facilitate the “transparency” feature of a blockchain platform.
Blockchain transparency for crypto leverage trading
- Disclosure of data on trading transaction
A blockchain-based trading platform would help to ensure complete transparency of all transactions that would be carried for cryptocurrency leverage trading. This way, traders will have complete knowledge of the transactions that have taken place for the cryptocurrency leverage trading. It would further help to prevent disputes (if any) that might otherwise arise from lack of access to transaction data.
- More credibility for trading portal
This way, a blockchain-based platform will allow a cryptocurrency leverage trading portal to establish credibility for the brand before the traders. In other words, blockchain-based cryptocurrency leverage trading could go a long way in scaling both the trader acquisition and retention rate of a trading platform.
- Exposure of leveraged position
The permissionless and transparency aspects of blockchain will assure complete exposure of the entire lifecycle of your cryptocurrency leverage trading scene. This way, you will be able to stay updated about your trade’s leveraged position. You can capitalize on the information to land up with more informed decisions for your next batch of cryptocurrency leverage trading in future.
- Ability to spot and block fraudulent attempt
Thanks to the transparency part, the blockchain technology can serve as a virtual automated monitoring system for every transaction made for cryptocurrency leverage trading on a trading portal. The surveillance aspect will enable the trading portal to stay updated about any malicious attempt on its blockchain-based database. The timely information will enable the cryptocurrency leverage trading platform to take necessary steps to block those unwanted attempts before it is too late.
Authentic unadulterated trading data
While we are talking about data transparency assured by blockchain, mention must be made of the “immutability” aspect of blockchain technology. A blockchain-based cryptocurrency leverage trading portal establishes the “trust” factor not just through the promise of transparency but also through the guarantee of authentic data. The immutability aspect of blockchain prevents any kind of manipulation or modification of stored data on blockchain ledger. As a result, you can be assured that all data related to your cryptocurrency leverage trading transaction or leverage position would always be unadulterated.
Are you planning for crypto leverage trading?
Do you have plans to try your hands in cryptocurrency leverage trading?
Discussing crypto leverage trading
Well, leverage trading is a form of trading where you trade with borrowed or lent funds. The trading exchange or broker will support you with borrowed funds so that you can open a big trading position.
But, there is the concept of margin (collateral) in cryptocurrency leverage trading. It refers to the specific amount of sum that you must deposit in the trading account to ask for leverage. As a result, cryptocurrency leverage trading is also dubbed as “margin trading”. So, how much would you have to deposit for collateral? Well, the specific volume of margin will largely depend on the leverage volume that you would request for the trade. You will also need to maintain a certain sum for maintenance margin.
For example, say you will be able to provide $100 from your side for cryptocurrency leverage trading on BTC. But, you believe that the BTC price will rally high in the coming few weeks and you wish to open a higher position to garner more profit. In that case, you can borrow funds on 10x leverage that will give you $1,000 for trading.
But had you asked for 20x leverage, you had to provide much less collateral, say $50.
Benefits of crypto leverage trading
The key benefit of cryptocurrency leverage trading is that it enables you to magnify the profit potential of your trade. As you know, higher the amount you will invest, greater will be your returns if the coin rallies up. Taking the example mentioned above, with cryptocurrency leverage trading, you will be able to open positions and make profit with as much as $1,000 – while putting in just $100 from your own side.
Then, another benefit is that, cryptocurrency leverage trading enables you to enjoy higher leverage with lower margin.
Risks of crypto leverage trading
Well, cryptocurrency leverage trading is not without risks. While large trading positions can help you attain greater profits when the market is taking an upward swing- the same can lead to giant losses if the market plummets down. On top of that, you will have the extra burden of maintaining your margin in the cryptocurrency leverage trading account and also pay the interest for lending the leverage.
Thus, you should always be particular about choosing your volume of leverage when it comes to cryptocurrency leverage trading. Go for a trading exchange that has capped the maximum volume of leverage you can ask for cryptocurrency leverage trading. Try not to go beyond 10-20x leverage, especially when you are starting out.