Cryptocurrency Exchange: Spot vs Margin

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September 9, 2020Upd on July 6, 2023

A cryptocurrency exchange can either be a spot exchange for exchanging between currencies that you own or a margin exchange – a forex-like platform for margin trading with leverage. To elaborate, a common way of trading crypto is to buy and sell cryptocurrencies on an exchange with your own funds. So, you would purchase coins or tokens at a certain price and then hold onto them until the price increases, either over the short or long term, and then sell them for a profit. For this purpose, you would use a spot exchange.

Margin trading differs in the sense that you are actually borrowing money from the exchange to boost your buying power, with the potential to access higher profits. Hence, margin trading lets you amplify your gains from market swings, enabling you to execute more complex, active trading strategies. To trade cryptocurrency with leverage, you would use a margin exchange.

Here’s an example to illustrate both types of trading:
Spot Exchange Used for exchanging 1,000 USD into LTC on LTC/USD trading pair.

Margin Trading Using 1,000 EUR as collateral in order to leverage 3,000 EUR worth of BTC and short it on BTC/USD trading pair using leverage of 3:1. The trading pair does not need to be the same as the collateral currency.

If you open a margin trade with a crypto exchange the capital deposited to open the trade is held as collateral by the exchange. The amount that you can leverage for margin trading is set out in the terms laid down by the platform on which you are trading, and your initial margin.

Benefits of Margin Trading Cryptos

The main advantage of trading on a margin exchange is the potential for bigger gains. If you’re an accomplished trader with deep knowledge of the cryptocurrency markets and understand how to manage risk, margin trading can offer an effective means to accumulating a larger balance. Margin trading cryptos also allows traders to generate a profit in bear market conditions by opening short positions.

You should note that as with margin trading of other kinds of assets, crypto margin trading can also amplify your losses. This is the biggest risk you need to be aware of before you consider trading on margin as it is possible to lose your entire balance. You should also be aware that you will need to pay interest on the amount borrowed as well as repay the loan amount, including the platform’s trading fees. Hence, it makes sense to start slowly if you’re an inexperienced trader by using low leverage and by managing your risks effectively with stop-loss or take-profit orders.

Launching a Cryptocurrency Exchange?

If you’re a business looking to launch a cryptocurrency exchange and offer your clients spot and/or crypto margin trading, white label exchange software is an ideal way forward in order to get you started quickly and hassle-free.

White Label Exchange Software

White label exchange software has already undergone thorough testing and is proven to work. Using a white label takes away the burden of having to deal with all the technical requirements, implementation and ongoing maintenance. A white label will also save you considerable time as customisation is a quick process. In addition, you will save a lot of money because your overall expenditure will be significantly less compared with developing the exchange on your own. For companies lacking one of one or more key components like crypto liquidity or the trading engine, a white label is an ideal solution as these aspects may not have otherwise been feasible options compared with doing it yourself from scratch.

B2Broker Cryptocurrency Exchange Turnkey

B2Broker offers a variety of turnkey solutions for brokerage and exchange businesses allowing businesses to set up and operate their own cryptocurrency exchange within a month.

Some of the key services offered by B2Broker besides the white label platform itself are the legal framework, access to various platforms and access to liquidity. In addition, each part of the solution including the user interface is customisable so users can change colour, navigation and buttons, etc, making it an ideal solution for setting up a cryptocurrency exchange.

Furthermore, B2Broker offers an exceptional cryptocurrency exchange turnkey solution to provide clients with the means to set up their own margin exchange within a month. B2Margin is a Margin Exchange trading platform with a wide range of functions that includes on-boarding, compliance, risk management, pricing and trading analytics. Designed for both institutional and retail trading, it supports multiple asset classes, such as FX, CFD, stocks, commodities, funds and cryptocurrencies.

There are also a host of benefits for clients opting for B2Broker’s Cryptocurrency Exchange turnkey solution. B2Broker is also in a strong position as a liquidity provider, since it aggregates B2BX and some of the largest exchanges to maintain the liquidity of a few top cryptocurrencies in terms of market capitalisation. Furthermore, the turnkey solution integrates cryptocurrency payment gateway, B2BinPay, which supports unlimited blockchains and tokens such as ERC20, ERC223, and ERC777 standard Ethereum tokens, NEM and NEO based tokens and more.

Create a revenue-generating business today. Click here to get started with launching your own Cryptocurrency Exchange turnkey and offer your clients spot and margin trading.

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