Best crypto exchange to trade with leverage.

Margin trading is getting popular from both sides: Some people run lending bots to earn passive income, other people borrow to trade with more money than they have in their trading account. In fact, the USD swap stats on Bitfinex show USD loans are near the all time high at the time of writing this article (31M USD, May 2016). It’s partially loans for Bitcoin long positions, but partially also loans to trade LTCUSD and ETHUSD now with the ETH roll related to the DAO project.

Why would someone borrow money to trade? Believe it or not, borrowing is not evil. To name one good reason for all, leverage lowers your exposure. You don’t have to send all money you have to an exchange that can go bust tomorrow for all you know. With the current lending rates it won’t even cost you an arm and leg to hold a leveraged position for a month or two.

Ways to borrow money to trade

Where do you borrow the money?

Some exchanges with margin trading offer “swaps”. Other users, willing to lend out, provide the funding. You automatically get a loan below your specified maximum daily rate as you open a position in margin trading section of the exchange. Once it’s open you get to see your margin costs. By closing the position the borrowed money plus interest is automatically sent to the person who provided the funding without you knowing who that was.
Margin swaps are publicly available for investments on Bitfinex and Poloniex. If you are looking to invest check this article.

Other exchanges don’t have margin swaps yet users can still margin trade. That is the case of Kraken. They have their own funds to lend out to users and don’t bother with the p2p lending system since it is more complicated to regulate.

Futures exchanges lend money free of charge (without interest). OKCoin in China has their own fund allegedly open to some chosen investors. From practical point of view it’s the money of the exchange. Cryptofacilities trade Bitcoin forward meaning the funding is from counterparty - the platform doesn’t invest in user margin.

Last but not least, people do borrow to trade on Localbitcoins or Bitstamp, none of which provides any form of margin trading. Traders need to borrow elsewhere and very often you will see trading loans on BTCJam. Rates are variable.

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