Margin Trading

Margin trading is buying or selling an asset with borrowed funds, posting collateral called margin and amplifying both gains and losses by the chosen leverage. Offshore crypto exchanges have offered bitcoin leverage as high as 100x, meaning a 1 percent adverse move erases the entire position.

Why it matters

Margin is the engine of crypto market volatility. When price moves against leveraged traders, exchanges forcibly close their positions, and those liquidations become market orders that push price further in the same direction, triggering more liquidations. Cascades of this kind have repeatedly produced double-digit percentage moves in hours, with billions of dollars of positions liquidated across venues in a single day during major events.

Margin also carries continuous costs, funding payments on perpetual swaps and interest on borrowed funds, which quietly erode positions held too long.

In the gold vs bitcoin debate

Leverage exists in both markets, COMEX gold futures also let traders control contracts worth many times their posted margin, but its footprint differs. A large share of bitcoin's short-term price action reflects leveraged positioning rather than spot demand, which critics cite as evidence of casino dynamics. Holders of unleveraged physical metal or self-custodied coins sit outside liquidation mechanics entirely, which is precisely the appeal of the spot-and-hold approach both communities preach.