Ethereum Margin Trading

You must open a cryptocurrency account through a broker or a cryptocurrency exchange. You need to search for one who gives you the best deal. Always go for a reputable broker or exchange to ensure that your funds are safe. Many unregistered and unregulated brokers or firms out there will entice you by offering services at a cheaper rate.

Create a cryptocurrency account through a broker or a firm and confirm your identity by providing your government-issued photo identity proof like a valid driver’s license, valid passport and so forth through an email you receive.

Deposit funds into your cryptocurrency account through bank transfer, debit or credit card, or if payment services like PayPal are available. Add funds into your account. Check the transaction history in the menu bar.

Search for Ethereum by typing ETH in the search menu of the app. Once the search completes, you can buy as much Ethereum as per the funds deposited in your account. You can even buy Ethereum in fractions.

Once you have Ethereum coins, you need to keep them safe. You can use an online digital wallet available on the exchange or broker, or you have the option of safely securing your coins in a hardware wallet.

It is advisable not to keep the coins on the platform when you are not trading, as there is always a risk of losing them in a cyber attack. Instead, make a habit of storing them in the digital wallet when you are not trading.

Now you can start trading Ethereum.

Ethereum is a widely accepted cryptocurrency, and you can also use it as collateral. However, you will be over-collateralized if you wish to secure a loan. It is normal to over-collateralize a loan since Ethereum is quite volatile. Therefore, around 150 % of the loan’s value in Ether must be put up as collateral to secure the loan.

When taking out a DeFi loan, it’s important to consider your collateral. This is crucial when using a non-stablecoin asset as collateral for a loan.

If the value of your debt position falls below a predetermined threshold in terms of dollars, most DeFi systems will immediately liquidate it. In addition, most platforms will let you lock up extra collateral to protect your position if you perceive your collateral’s value is declining.

For details on the terms and circumstances for liquidating positions in collateralized debt, contact the supplier of your DeFi platform.

Ethereum margin trading is one of the cryptocurrency trading strategies which involves minimum capital and allows traders to maximize profit. Such a strategy is advantageous when Ethereum is highly bullish for a short period, and traders do not have the funds to purchase the underlying asset.

Normally, most brokers and exchanges offer a 2X margin; in other words, if you pledge for 1ETH, the margin of 2X allows you to purchase one more ETH.

However, few brokers and exchanges are offering 3X and 5X. Thus, 3X means that when you pledge 1ETH, you can buy two more ETH, while in 5X, you pledge 1 ETH and buy four more ETH.

Now that you know how margin order works, let’s understand how to place an order.

Login to your cryptocurrency account and access “Margin wallet” from the top bar menu.

Make sure you have enough Ethereum (ETH) in your margin wallet.

Select trade ETH/USDT in your “Margin wallet” to access the “ETH Margin Trading Window.”

Then navigate to the “Order Placement” and “Buy ETH.”

Do not forget to select and enter “Borrow” mode; the maximum amount of USDT you are permitted to borrow will be displayed.

Just fill out the order placement form with the price and quantity of ETH you want to purchase, then click the Margin Buy ETH button to place your order, just like with standard ETH spot trading.

When the margin order is executed, you will receive the ETH tokens and a USDT loan with hourly interest in addition to the ETH tokens.

Margin Calls & Liquidation

Blockchain Tradein offers a feature on its cryptocurrency platform. You will receive a Margin Call Alert if your crypto asset runs the risk of getting liquidated when the price of Ethereum falls below a certain level.

If the price continues to fall further, then your cryptocurrency will get forcefully sold or liquidated by the exchange.

Blockchain Tradein uses a feature called the Margin Level. The margin level determines when you receive a margin call and when liquidation occurs.

Margin Level

Each margin trading account has a Margin Level based on the following formula.

Margin Level = Total Asset Value
(Total Borrowed + Total Accrued Interest)

Depending upon the financial health of your margin account, your Margin Level is determined.

You can borrow more money if your margin is 1.5 or higher, which is considered low risk.
However, you won’t be permitted to take out any other loans if your margin level falls below 1.5.

If your margin level drops to 1.3, you will receive a Margin Call alerting you to either reduce your loan by returning the borrowed cash or boost your collateral by depositing additional money or crypto assets.

Your assets will automatically liquidate if your margin level falls to 1.1, forcing the exchange to sell them at market value to pay back the loan.

When under 5X Margin Mode.

You can borrow more if your margin is 1.25 or higher, which is considered low risk.
However, you won’t be permitted to take out any further loans if your margin level falls below 1.25.

When your margin level exceeds 1.15, you will receive a margin call, which is a notification that you should either reduce your loan by returning the money you borrowed or boost your collateral by depositing additional money or crypto assets.

If your margin level falls to 1.05, the exchange will immediately liquidate your holdings, forcing you to sell your crypto assets for the market price required to repay the loan.

How to Close Your Ethereum Margin Position?

Go to the ETH Margin Trading Window and click the “Sell ETH” section.

Make sure that “Repay” has been selected.

Ensure you have specified the quantity and price of ETH you wish to sell. You have the option to sell 100% of all your Ethereum.

Verify your order detail before executing the order by clicking on “Sell ETH.”

Your order will be placed in a queue for processing, and after it is finished, any USDT received will be used to pay off any outstanding USDT loans. The sum remaining will be sent to your margin wallet’s USDT account.