Media reported that coinbase, a cryptocurrency exchange, opened margin trading today to facilitate clients in need to invoke leverage. It is important to note that in the area of investment, risk and return are different sides of a coin. With luck, leverage can double your returns, but if you dot back, it will also accelerate your position, so it is not recommended that risk-free retail investors enter blindly.
The exchange said margin trading would take place on the Coinbase Pro platform for professional investors.
Retail and institutional investors can invoke up to 3x leverage to submit margin trading orders for any denominated asset in us dollar-based currencies.
However, only 23 U.S. states currently have retail investments, and 45 other states and nine international institutional investors can trade margin on the Coinbase Pro platform.
Margin trading consists of a number of potential use cases, such as when you can allocate a small portion of your portfolio to margin trading orders to hedge multiple positions.
Coinbase believes the company has enough liquidity to help investors set up complex margin trading orders and wants to limit them to top traders.
The company also considers the customer’s previous activities on Coinbase Pro to view transactions, balances and entry and exit items. If you are identified as an active trader, you are allowed to trade on margin.