Leverage trading crypto refers to borrowing funds from your broker to trade cryptocurrencies with a larger position than your actual capital. This method of trading allows traders to increase potential profits. Its biggest downside, however, is that it amplifies the risk of losses.
Leverage Trading Crypto Example
Suppose you have $1000 and want to trade Bitcoin. With 5x leverage, you can control a $5,000 trade ($1000 x 5). If Bitcoin’s price rises by 5%, you’ll make $250 (5% of $5,000) through leverage trading instead of just $50 (5% of $1000) if you traded with your capital without leverage.
However, if Bitcoin drops by 20%, you lose your entire $1000(20% of $5000) due to liquidation.
A 20% price drop for Bitcoin is not far-fetched. In fact, this digital currency has fallen even more on multiple occasions.
For example, on February 27, 2025, Bitcoin’s price dropped by between 22.24% and 24.10%.
With this understanding, let me now give you tips on how to succeed with the leverage trading crypto approach.
1. Choose A Cryptocurrency With A Great Potential
Nasdaq lists Solana(SOL), Cardano(ADA), XRP(XRP), and Stellar (XLM) among the top 6 digital coins whose values could increase exponentially in 2025.
Since the start of the year, SOL has risen by 26.9%, now trading at just over $163 with a market cap exceeding $83 billion. ADA has gained 36%, reaching $0.99 with a market cap of nearly $35 billion. Meanwhile, XRP has surged by an impressive 327%, now priced at $2.68 with a market cap approaching $155 billion. XLM has also seen significant growth, climbing 143% to $0.33, with a market cap of $10 billion.
Choosing any of these currencies for your crypto leverage trading strategy could be a good crypto investment decision right now.
Finding cryptocurrencies with great potential requires thorough research and analysis. Some of the factors you need to analyze besides percentage gains are:
- The market cap — A higher market cap indicates stability. However, a low market cap is not entirely a bad sign as it may suggest a hidden growth potential. This is especially true if the coin continuously shows percentage gains as opposed to losses.
- The trading volume — A trading volume can be regarded as a measure of a coin’s liquidity. A coin with a higher trading volume has high liquidity, and is in high demand. Notably, a trading volume of over $100 million daily can be considered high for altcoins.
Speaking of which, the daily trading volumes of Solana, ADA, XRP, and XLM are as follows:
#1. SOL– $3.17 billion according to Trading View.
#2. ADA — $766.30 million according to Trading View.
#3. XRP – $3,239,609,144 according to Coin Market Cap.
#4. XLM — $188467195.43 according to Coin Market Cap.
2. Select A Good Crypto Leverage Trading Platform
Crypto leverage trading platforms offer different leverages and there’s no universal standard rule for leverage ratios in crypto trading. However, leverage limits are regulated and regulations vary by country and the regulator.
For example, in the UK, the FCA limits crypto CFD leverage to 1:2. Similarly, in Australia, the ASIC enforces the same limit. Likewise, Japan’s FSA follows the same limit rule. Meanwhile, in the US, the CFTC in collaboration with the SEC, restricts the leverage ratios to 1:5.
However, when it comes to offshore brokers, many of whom are either unregulated or lightly regulated, it’s always a different story. These brokers tend to offer leverage as high as exceeding 1:100 to lure traders while exposing them to the risk of liquidation.
Have you ever wondered why such brokers often operate from offshore jurisdictions such as Seychelles, the St. Vincent and the Grenadines(SVG), Seychelles, the Bahamas, or Mauritius?
It’s because many of them are scammers and these jurisdictions have lenient regulatory requirements and minimal oversight compared to other jurisdictions with strict regulatory authorities such as the CFTC, SEC.GOV, FCA, and ASIC.
Be sure to choose a leverage trading crypto platform that offers competitive, and safe leverages that will not expose you to the risk of losing all your capital.
As I stated in my review of Kraken, this crypto leverage trading platform provides just that. Binance, Coinbase, and Bybit can also be great options.
3. Avoid Scammers To Succeed In Your Leverage Trading Crypto Strategy
Nowadays there are many dubious trading platforms that lure unsuspecting traders with various deceptive tactics such as high leverage, fake testimonials & reviews, guaranteed profits and ROIs, high profits, and so on.
In fact, at Scamreader, we often receive emails from scam victims who are seeking help after losing money to these crafty and shady characters. Speaking of which, if you’ve fallen victim to one, go to this page, or email scamread@scamreader.info to report the scam and seek help.
The good news is that with the right knowledge and an understanding of the warning signs, you can detect a scammer from a mile away.
- Is the purported broker licensed and regulated by a credible regulatory body such as the FCA, ASIC, SEC.GOV, or CFTC?
- Have they listed verifiable regulatory details?
- Do they have a strong online reputation with credible positive feedback from clients? Reddit and Twitter can be good places to find such feedback. Trustpilot and Facebook are not as reliable as these platforms are sometimes flooded with incentivized reviews.
- Is the purported broker transparent about the company’s background, location, fees, terms & conditions, and other important aspects?
- Are they operating from a country with strong financial regulations or do they have a branch there?
- Is the purported broker giving potential clients ample time to conduct due diligence, review the T&C, and ask questions before signing up and depositing money?
Note: If the answer to most of these questions is “NO”, know that you are looking at a possible scammer. You need to deviate from such a broker and find one that meets the criteria outlined in the above checklist.
Final Thoughts
Leverage trading crypto can be a profitable approach for amplifying potential profits as explained in the above example.
However, it can also cause you to lose more money than you should if not executed appropriately.
Speaking of which, the best way to execute this cryptocurrency trading strategy is to:
One – choose a cryptocurrency with great potential.
Two – select a good crypto leverage trading platform such as the ones listed above.
Three – avoid scam brokers or trading platforms.
FAQ
1. What is leverage trading in crypto?
Answer: It is whereby you open positions larger than your actual trading capital as a trader by borrowing extra capital from the broker.
2. How much can I lose with a 10× leverage?
Answer: Up to 10 times the amount of capital invested.
3. What does 20× leverage mean?
Answer: It means you are trading with 20 times the capital you actually have.