Margin trading is the form of trading that is meant for more advanced users. It is meant for advanced users because there is a lot of technical knowledge that is required in order to actually make any kind of profits.
While users can generate a lot of profit from margin trades, the chances of them going under loss are also very high. Thus, one needs to be very careful while performing any margin trades. In the currently centralized exchanges, the traders need to manually place the margin calls that the exchange makes. This is very tiring. Additionally, the odds of one losing money while using the existing margin trading platforms is very high because the user never receives any warning when his funds are close to being liquidated. Thus, the margin trader does not get any chance at avoiding the loss of his funds. This is where the CoVEX trading platform has made use of the decentralized system to simplify margin trading.
CoVEX- Simplifying Margin trading:
In cryptocurrency margin trading, there are essentially two different set of people involved, the lenders and the borrowers. The lenders lend the money to the borrowers. The borrowers borrow the money from the lenders and then return it back to them along with an added interest. The whole point of margin trading is to leverage the price of a particular cryptocurrency investment. If the price moves as predicted, you end up making a lot of profits and if it goes against your prediction, then you end up losing a lot of money.
The centralized exchanges have been forced to establish trust, increase transparency and avoid any frauds. Due to this, they are not concerned about any other factors involved in margin trading. However, all these three factors are the main ideologies of decentralization on the blockchain technology. Thus, CoVEX makes use of this in order to improve the experience on the CoVEX trading platform.
In order to avoid any scams and protect the interests of all the traders, each and every margin call is backed by the collateral present in the borrower’s account. Thus, in order to borrow any money, the borrower needs to have a certain amount of cryptocurrency in his wallet. The maximum amount that a person can borrow is calculated based on his current portfolio.
Suppose a person wants to borrow 2 BTC, then his wallet needs to have 30% of what he wants to borrow. Therefore, the person needs to have 0.6 BTC in order to borrow 2 BTC. After a person borrows funds for margin trading, if the price of the cryptocurrency goes below a certain margin, then the person will be forced to liquidate all his funds and everything will be transferred to the lender. Thus, margin trading can be very scary at times.
[2] CoVEX margin trading platform has been designed to facilitate the margin lenders on the platform as well. The margin lenders on the CoVEX platform can set their own rates per ratio of leverage and return. Currently, this is done by the trading platform. Thus, limiting the overall capability of the lender. CoVEX platform will setup a condition on how the returns and risk can be easily controlled by the user.
CoVEX has simplified this to a very large extent. Unlike traditional margin trading where the funds get liquidated as soon as they breach the margin line, on CoVEX users receive a warning when the value of funds is close to the margin line. Thus, users get an opportunity to add more funds and have a longer position on the funds. Thus, instead of losing everything at once, CoVEX provides its users an opportunity to make more profits and avoid unnecessary losses.
With the centralized exchanges, there is a lot of confusion surrounding how to lend funds for margin trading. CoVEX has simplified even that. There is a dedicated lender and dedicated borrowers wallet for each Bitcoin trader. Any funds that you would want to lend can be placed in the lending wallet and it will automatically be matched to a borrower. Thus, simplifying the entire process.
Conclusion:
Margin trading might seem like a very scary thing. However, CoVEX trading platform will help you understand all the aspects involved in margin trading. Thus, simplifying the most advanced form of trading for everyone.
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