What is Margin Trading?
Margin trading is simply borrowing money from an institution to invest. In MappedSwap’s case, a platform to buy or invest in crypto currencies. The loan is payable at a later date with incurred interest. The concept of margin trading on MappedSwap works the same way in the financial world.
In the business world, many businesses are built from borrowed money. Users who decide to take up a loan to invest should well understand the risks involved, including doing a margin trade. It can be regarded as a gamble, the higher the opportunity in making big, the higher the risk of losing big too.
For the easiest understanding, margin trading is similar to a credit card. We pay in advance using the credit that the bank provided, but once it’s due a month later and payment is not done, it will incur surcharges. This literally works the same as margin trading, investors are using borrowed money.
The things to look for in a Margin Loan
Similar to a traditional loan, users who want to get a loan, you have to give something of value in place as a collateral. Collaterals in traditional loans are wide ranging, from cash, estates to stocks. However, in MappedSwap, it would be crypto currency, but not any crypto currency, stablecoin such as USDC or major crypto currencies like Bitcoin (BTC) and Ethereum (ETH).
The amount you can borrow is normally related to how much you can use as collateral, it also depends on the price of the collateral at the point of time of loan. For example, today, you use 1 BTC as collateral for a loan, 1 BTC is priced at 43,000 USD, you may get up to X amount more based on the scheme that the institution/platform is offering.
The interest that comes with the loan, the interest rates, varies from the amount of collateral and loan amount. Normally, loan repayments are set to clear the accumulated interest first, rather than the loan amount. MappedSwap uses this arrangement for loan repayments too.
MappedSwap offers margin trade loans for crypto based on crypto assets, providing up to 10x of your collateral, again depending on the amount set for collateral but users have to repay the interest for loan before the loan amount.
Benefits of Margin Trading
The only benefit from using Margin Trading is using the power of leverage, it helps to grow your investments that were used to purchase from the loans undertaken. Normally the growth of value in investments will be more than the loan amount and interests added up. However, this is the optimal situation that investors aim for.
With more investing power, you are able to diversify your investments, such as buying different types of crypto. Hold true to never put all your eggs in one basket, anything that may happen to your investment may cost you everything.
Interest rate is something loan takers worry about. Institutions always come up with very competitive rates to attract investors. Over in MappedSwap, it charges hourly interest rates. For example, if you took a loan at 9:25am, and return before 10:00am, there is no interest charged. The clock runs and charges after it passes the 00 mark. In other words, every 9:00, 10:00, 11:00, interest will incur hour on the hour.
Be warned
All loans are a leveraging tool. Margin trading can give you big opportunities, but be sure to do all the homework on the risks before taking the leap.
Disclaimer:
Investing in decentralized finance products is considered high risk, especially with cryptocurrency. We are not responsible in any way for inciting any decisions that you may undertake upon reading our materials. We do not provide professional financial advice, when in doubt, please consult your professional financial advisor before acting.
For more information on MappedSwap,
Website: www.mappedswap.io
Twitter: https://twitter.com/mappedswap
Facebook: https://www.facebook.com/MappedSwap-110417171527222
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