Essentially a loan, margin trading allows you to borrow funds to open positions larger than your account balance. The loan has to be repaid once you close the position.
We allow you to borrow funds in eight cryptocurrencies, as well as two fiat currencies (EUR and USD).
The margin borrow limits for each currency varies based on your current verification tier:
|Tier 1||Tier 2||Tier 3||Tier 4|
Each limit is independent from the other. So a Tier 3 user could borrow up to 50,000 EUR and 50,000 USD at the same time (assuming there are funds available to lend).
If you try to open a position with margin that exceeds your borrow limits, you will see a "Margin allowance exceeded" error.
Long vs Short
For a crypto-to-fiat pair like XBT/USD:
- To go long (i.e. buy XBT), you need to borrow USD and thus the USD borrow limits apply.
- To go short (i.e. sell XBT), you need to borrow XBT and thus the XBT borrow limits apply.
For a crypto-to-crypto pair like ETH/XBT:
- To go long (i.e. buy ETH), you need to borrow XBT and thus the XBT borrow limits apply.
- To go short (i.e. sell ETH), you need to borrow ETH and thus the ETH borrow limits apply.
Note: the limits for going short are not supposed to be the same as the limits for going long. Limits are not based on the exchange rate. They are based on how much of each currency we have available for lending.
Your account is Tier 3 and want to open a long position in bitcoin against fiat currencies. The maximum size of your position, assuming you had enough collateral to open it, would be 50,000 USD worth of bitcoin plus 50,000 euro worth of bitcoin. The number of bitcoins that it would be possible to buy in these positions would depend on the price of the current price of bitcoin. The limit would not be 25 bitcoin (the tier 3 limit for borrowing bitcoin).
If you wanted to open a short position in bitcoin against USD, EUR, or ETH, the limit on the size of the position would be 25 bitcoin because when you're shorting bitcoin, you're borrowing bitcoin from Kraken and selling it.