What is Margin Used? (USDT)

What is Margin Used? (USDT)

Just the way it is possible to trade/invest in shares using borrowed funds, essentially known as leverage; it is very much possible to do the same concerning crypto assets on a crypto exchange platform.

Margin Used (also called Margin Leveraged) refers to the trading/investing in crypto assets with leveraged or owed funds, while only investing a smaller portion of own capital. Margin Used is the amount of crypto used to enter into a leveraged position.

Similar to shares, one can take long/short positions while dealing with crypto assets.

A long position involves buying cryptocurrency in anticipation of selling it in the future when the price rises, to make a profit from the price difference thus arising. Whereas in a short position, a cryptocurrency is borrowed at its prevalent market price to repurchase it at an immediate price drop to earn a profit.

Using margins for crypto trading, one can increase his gains multifold if the market trends move favorably to his advantage. Hedging too works to the trader/investor’s advantage by enabling him to hold a short position in case of an existing risk of crypto assets’ value falling continuously. Crypto assets can also be short-sold using the same technique.

The user needs to ensure that a proper risk assessment is made in place before doing the above, to avoid the opposite. Besides, the gains potentially earned need to be significantly higher than the other transaction costs incurred.

Margins used are again classified into two – cross margin and isolated margin. Isolated margins involve assigning individual funds put up as collateral to different trading pairs i.e. BTC & USDT. Risk is isolated here to specific trading pairs, while also limiting the margin level. Whereas cross margins share the same margin in all open positions, thus reducing liquidation risk.

Thus, crypto platforms indicate the Margin Used level and the risk of leverage that exists beforehand i.e. loss in case of liquidation.

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