In this article we scrutinize the exchanges that do support US citizens and offer Bitcoin to USD margin trading.
Please note that we will not consider USDT in this article. This US dollar-pegged cryptocurrency (and its margin trading possibilities) will be discussed in an future post.
We commence by using Exchangify to fetch a preliminary list of cryptocurrency exchanges that offer BTC/USD margin trading.
After that, we dig a little bit deeper and have a look at the characteristics of each exchange, while keeping into consideration the two most important characteristics for margin traders: (funding) liquidity and (trading) fees.
The preliminary list
In order to obtain the preliminary list, we enter the appropriate values in the search tool on the Exchangify homepage.
We then open up the Advanced Filters and tick off margin trading. After clicking the Search button, the list appears, as can be seen in the image below.
Getting the preliminary list of exchanges.
The list consists out of 4 exchanges, with reported BTC/USD 24hr volumes spanning from 0.01 BTC up to 3000 BTC.
At first glance, we can immediately discard Cobinhood from the list, as the 24hr volume is far too low to be of any interest. This is unfortunate, as Cobinhood has zero trading fees.
Similarly, bitFlyer has a volume of around 60 BTC which equals roughly 350,000 USD at the time of writing. This is an indication of rather thin order books which consequently could lead to significant slippage when executing large trades.
Please note that while CEX.IO is active in the United States, as of right now, 25 states are not supported. These are: Alabama, Alaska, Arizona, Arkansas, Colorado, Florida, Georgia, Idaho, Iowa, Kansas, Louisiana, Maryland, Michigan, Mississippi, Nebraska, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Tennessee, Texas, Vermont and Virginia.
Unfortunately, despite offering BTC/USD margin trading, Liquid (formerly Quoinex) is not yet available to US citizens. If this changes in the future, it could be a very interesting competitor with its cheap funding rates and 0 % trading fees for fiat-to-crypto trading.
In the remainder of this article, we will have a detailed look at margin trading process at both Kraken and CEX.IO.
Kraken has been the go-to point for US-based margin traders for a while. It has decent liquidity and offers up to 5x leverage, which should be enough for most margin traders. Kraken’s headquarters are located in the United States, which increases the overall trustworthiness quite significantly compared to some exchanges headquartered in tax or regulation havens.
Traders can deposit USD through bank transfer. Unfortunately, credit cards are not supported. Traders who wish to use credit cards should consider CEX.IO.
Despite Kraken’s high trustworthiness, some issues remain present.
The first issue with Kraken is its trading engine. Despite the redesign that happened a few months ago, Kraken is still quite notorious for its slow and buggy trading engine (especially in times of high volume).
This is especially relevant for margin traders, where speed and the ability to quickly act on certain price movements is key to success.
The second issue is the fact that Kraken does not use a lending system for margin funding, which means the margin loans come directly from their operating account. As a result, there is a fixed rollover fee of 0.01 % per 4 hours (!!) for simply maintaining a position.
In order to understand why this is high, we can have a quick look at the historic lending rate overview provided by Coinlend.
Coinlend historic funding rates for USD @ Bitfinex and Liquid (Quoinex)
As you can see, the daily funding rate on Bitfinex for USD is 0.01 % at the time of writing. The funding rate at Liquid is even lower at the time of writing, 0.001 %, but fluctuations seem to be more prevalent on Liquid as well.
Either way, it is clear that the average lending rate is significantly lower than the 0.06 % Kraken charges per day.
Lastly, we need to look at other fees. Kraken charges an additional 0.01 % opening fee when a position is opened.
This is in addition to the usual trading fee of 0.16 % maker or 0.26% taker. There is no fee for closing a position.
Let’s do the math for a 5x margin long on BTC/USD for 10,000 USD that is kept open for 24 hours. Let’s also assume the position is opened as a maker (adding liquidity to the order book) and not as a taker (removing liquidity from the order book).
The trader borrows 10,000 USD from Kraken and buys BTC (goes long). He undergoes the 0.01 % opening fee (1 USD) and 0.16% trading fee (16 USD). Keeping the position open for 24 hours amounts to 0.06 % (6 USD). Settling the position (in the case of a long, the BTC is sold again) leads to another 0.16% trading fee (16 USD).
Total fees amount to:
Let’s compare this to CEX.IO.
CEX.IO is an exchange headquartered in the United Kingdom. As mentioned above, CEX.IO accepts credit cards for USD deposits.
They offer up to 3x leverage, which is lower than Kraken, but should still be enough for most traders.
The most important issue with CEX.IO is the 24hr volume for BTC/USD.
While 2 million USD is far from terrible, large leveraged trades could lead to slippage.
Fees aren’t great either. There is an opening fee 0.02 % and a rollover fee (4 hours) of 0.01 %. Just like on Kraken, there is no closing fee.
Trading fees are 0.16 % as a maker and 0.25 % as a taker.
You can already tell this isn’t going to be a lot cheaper than Kraken, on the contrary, it will be slightly more expensive.
Doing the math again fora 10,000 USD long position, the trader will pay the following fees:
Overall, Kraken remains the best option for margin trading BTC/USD as a United States citizen, but be wary in high-volume periods.
In our opinion, the main reason CEX.IO should be chosen over Kraken is when the trader wishes to deposit using a credit card. However, this in turn will lead to higher deposit fees as well, which should be taken into account in the trader’s total fee calculation.
At the beginning of this post, we mentioned USDT (aka tethers). This is a cryptocurrency pegged to the US dollar, which means its value is equal or very close 1 USD. Although USDT has been at the center of various controversies, it is most likely legitimate and should be safe to use.
The advantage is that since USDT is not a fiat currency, regulations are less strict, which in turn means it is more common than BTC/USD. Traders looking to trade BTC/USDT on margin can consider Poloniex, BitMart or EXX.
Please note that EXX has been accused of wash trading in the past, so tread carefully.
We also advise margin traders that trade BTC/USD to keep a close eye on Liquid. The exchange offers a funding market, zero trading fees and a very slick user interface.
US citizens can only margin trade crypto pairs as of right now, but this may change in the near future, potentially providing Kraken with a worthy competitor.