Margin Trading
Borrowing funds on an exchange to open a larger crypto position than your own balance would allow, increasing both potential gains and losses.
Margin trading is a way to trade crypto with borrowed funds, usually through a centralized exchange or broker. Instead of paying the full value of a position yourself, you provide collateral called margin, and the platform lends the rest. This creates leverage, meaning a price move has a larger effect on your account than it would in a normal spot trade. Because the loan must be repaid and the position is backed by collateral, exchanges may charge interest or fees and enforce rules about minimum account value.
It matters because margin trading lets traders take larger long or short positions, hedge existing holdings, or use capital more efficiently. The same leverage also increases risk: if the market moves against the position, losses build faster, and the exchange may issue a margin call or automatically liquidate the position to protect the borrowed funds. For example, with 5x leverage, a $200 margin deposit can control a $1,000 Bitcoin position, so a 10% favorable move can have a much bigger impact, but a 10% unfavorable move can wipe out a large share of the collateral.
Other terms in CeFi
CeFi
Centralized finance is crypto services run by companies that custody assets, manage accounts, and provide trading, lending, or yield products.
Centralized Exchange
A platform run by a company that lets users buy, sell, and trade cryptocurrencies through managed accounts and order books.
Crypto Loan
A loan that uses cryptocurrency as collateral or provides borrowed crypto or cash through a crypto lending platform.
Custodian (Crypto)
A crypto custodian is a service that holds and safeguards digital assets or private keys on behalf of users or institutions.