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Author Topic: Margin Trading - using BTX or ETH as a collateral  (Read 261 times)
zzert1234
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June 13, 2017, 12:32:58 AM
 #1

Hi Guys,

I am learning about Margin Trading,

And was wondering about  couple of things:

1. Using ETH/BTX as collateral. On kraken for example, I can use ETH and BTX as collateral.  In downturn the collateral itself loses value ... I am not sure if this impacts/changes my Margin Level making it closer to the Margin Call red-line which is 80 % at kraken... Kraken does say something to that effect in their help articles ... but their examples calculation is based on EUR/USD https://support.kraken.com/hc/en-us/articles/203053156-Examples  ..


2. I do want to use ETH /BTX as collateral to borrow more ETH/BTH.. I am wondering if someone has done this and specifically what should be the maximum Margin I use. For example if I have in my account 20 ETH, then I don't want to use more than a certain amount of that for Margin. Maybe I want to use max 10 ETH for margin. I am not sure how to make this calculation but I want even if ETH loses say 50 % , which it could , I still don't cross the 80% minimum margin that Kraken requires , before doing Margin Call on you.

Any feed back on this is appreciated. Above I do use the terminology Kraken uses, so it may vary from people's experiences, and please excuse if it sounds confusing to you.
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ktabb
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June 13, 2017, 01:07:25 AM
 #2

Hi Guys,

I am learning about Margin Trading,

And was wondering about  couple of things:

1. Using ETH/BTX as collateral. On kraken for example, I can use ETH and BTX as collateral.  In downturn the collateral itself loses value ... I am not sure if this impacts/changes my Margin Level making it closer to the Margin Call red-line which is 80 % at kraken... Kraken does say something to that effect in their help articles ... but their examples calculation is based on EUR/USD https://support.kraken.com/hc/en-us/articles/203053156-Examples  ..


2. I do want to use ETH /BTX as collateral to borrow more ETH/BTH.. I am wondering if someone has done this and specifically what should be the maximum Margin I use. For example if I have in my account 20 ETH, then I don't want to use more than a certain amount of that for Margin. Maybe I want to use max 10 ETH for margin. I am not sure how to make this calculation but I want even if ETH loses say 50 % , which it could , I still don't cross the 80% minimum margin that Kraken requires , before doing Margin Call on you.

Any feed back on this is appreciated. Above I do use the terminology Kraken uses, so it may vary from people's experiences, and please excuse if it sounds confusing to you.

I'm not sure if it works any differently with crypto, but I do margin trading with stocks. If the value of my collateral goes down and forces me past the threshold margin limit imposed by my brokerage (and the law), then I'll get a margin call. Alternatively if the value of what I purchase goes down, the same situation can occur. I imagine that this would be the same with crypto.

If you want to purchase eth with all of your funds then you can't purchase more than your available cash balance and still be safe from a margin call if the price goes down by 50%. The maximum you can purchase and not get a margin call if the price goes down by X percent is (1.8 * current account value * (X / 100)). At 50% the value this gives is less than the value of your account, so anything above the amount of cash you have will trigger a margin call if the price gets cut in half.

I would recommend not trading on a margin with crypto. It is far too volatile and extremely risky.

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