How to Margin Trade Cryptocurrency in the United States

Kraken and FTX.US are the only major exchanges that offer cryptocurrency margin trading to US traders. In both cases, there are capital requirements and other criteria that must be met.

These requirements are based on a rule implemented by the Dodd-Frank Act that requires margin participant in the US to be an “Eligible Contract Participant (ECP)” as defined under U.S. law (Section 1a(18) of the Commodity Exchange Act).

However, while both Kraken and FTX.US base their rules on this act, Kraken’s margin trading criteria are significantly more strict. This is because FTX.US uses a broad interpretation of the rules to allow for clients who simply want to hedge (as explicitly allowed for in the act), whereas Kraken suggests a net worth of almost double the required amount. This boils down to FTX.US only requiring you to have an entity with $1 million (or $5 million as an individual) as opposed to Kraken which requires $10 million regardless.

Given the above, this article will discuss how to margin trade as a United States citizen using FTX.US, since this option will be relevant to more traders.

Other Margin Trading OptionsFTX, Binance, and ByBit are top choices for global customers. While these are excellent choices for margin trading in general, none of those exchanges allow US traders on their platform. Meanwhile, CME crypto futures, DEXs, and options trading products like GBTC and ETHE allow US citizens other options for leverage. Again, while these are excellent choices, none are traditional cryptocurrency exchanges (and any exchange with margin is theoretically subject to the same minimum standards).

Kraken Stopped Offering Margin, Where Should I Trade? Kraken stopped offering margin trading of cryptocurrency to retail customers as of June 23, 2021. If you are a Kraken customer losing access to margin, check out FTX.US due to their slightly less strict restrictions. Don’t forget to use our 5% off fees for life code ftxdiscountccf.

Using a VPN to Margin Trade: In the past, some US citizens have used VPNs to access crypto exchanges to margin trade. However, as of 2021 exchanges have really cracked down on allowing margin trading for accounts that don’t KYC. Even where they have not, they typically have reduced withdrawal limits to the extent that it makes trying to get around the rules a near-impossible task for many traders. Add to that the complications with tax reporting and other potential issues you could face, and US traders will most likely want to look to FTX.US and Kraken for margin trading.

Margin Trading With FTX.US as a US Citizen

To margin trade at FTX.US you must have over $100,000 in cryptocurrency and/or USD on the FTX.US platform. You must also attest that you own over $1 million in assets as an entity, $5 million as an individual, or meet other criteria (for most traders, the aforementioned asset requirement will be the easiest to achieve). While this lower level of qualification only allows you to hedge, it can at least get you set up with a fully legal crypto margin account.

If you can meet these criteria listed below, the steps in the following section will get you set up with an FTX.US margin trading account. If you would also like to earn a passive income margin lending, you can then message FTX.US support and let them know you want to get your account set up for margin lending.

Criteria for Qualifying for FTX.US Margin

1) You must have at least $100,000 on FTX US at the time of qualification.

2) You must meet one of the following additional criteria:

(a) You are an entity with $10 million in total assets;
(b) You are an entity with a guarantor that is an entity with $10 million in assets;
(c) You are an entity with a net worth of at least $1 million that is hedging;
(d) You are an individual with “amounts invested on a discretionary basis” that exceed $10 million, or $5 million if hedging; or,
(e) You are an entity with at least $1 million in net worth that is entering into a swap (not a credit or equity derivative) to hedge commercial risk, with all owners meeting the foregoing requirements.

How to Sign Up For Margin Trading on FTX.US:

  1. Create an individual account on FTX.US (use the following referral link for 5% off all fees at FTX.US when you sign up, https://ftx.us/#a=ftxdiscountccf).
  2. KYC up to the advanced level.
  3. Deposit at least $100,000 worth of crypto assets or fiat currencies.
  4. Under “settings” to get to your profile. Then under “margin” click “enable margin trading”.
  5. Attest that you meet at least one of the requirements and agree to the other terms.
  6. Your account will either be instantly approved or will be under the approval process. Once approved you can begin margin trading.

NOTE: You need to enable margin trading for each subaccount.

How to Enable Margin Lending on FTX.US: To enable margin lending, message support after your margin account is set up and let them know you want to do margin lending. If you qualify for margin trading, you should qualify for margin lending as well. Although it is on a per-customer basis, so you will have to message them and request this.

What is Needed to KYC on FTX.US

The following is the required documentation to KYC on FTX.US. You must KYC to the advanced level to margin trade and margin lend.

Individual Accounts

  • Legal Name
  • Place of Residence
  • Date of Birth
  • ID Document
  • SSN
  • Proof of Address
  • Selfie to confirm identity
  • Source of Funds

Corporate Accounts

  • Entity Name
  • Principal Office Address
  • EIN/TIN
  • Entity Formation Documents
  • List of all Executive Officers and Directors
  • Beneficial Ownership
  • ID Documents
  • SSN
  • Proof of Address Document
  • Selfie to confirm identity
  • Source of Funds

How to Margin Trade on FTX.US

Once your account is set up for margin trading, you simply toggle the “margin” on any trading pair. It is right below the slider for choosing how much you want to buy or sell. This will allow you to leverage your assets to margin long or short. If you click the “calculator” symbol in the top right of the order form for trades you’ll see an advanced view where you can set your stop and take profit triggers. You should generally always set these when using margin, as it is cheaper to get stopped out than it is to get liquidated and pay the liquidation penalty.

Please keep in mind you not only pay fees on the amount you borrow short or long. You also pay an hourly funding rate. These fees can add up if you are taking the direction of the trade in which margin traders are paying the other side.

Also, keep in mind, limit orders are going to be cheaper than market orders, so if you can enter using limit you’ll save money.

Lastly, you can “market close” a position at any time. Keep in mind though this will instantly close the position at market price by selling only the amount of the asset you need to pay off your debt, it won’t just reduce the position like a stop or take profit will.

Given all this complexity for a newcomer, it is highly advised you start small and pay close attention to the results of each action.

Slippage and Liquidity: Given Kraken’s capital requirements, FTX.US is the only game in town for many white-hat US traders. Despite that, FTX.US doesn’t have the level of liquidity other exchanges do yet (partly due to the strict capital requirements of course). So if you are placing big orders, make sure to look at the books. You can get some hefty spreads and slippage when placing very large margin orders. On a highly leveraged position, this can get you into trouble. So consider this when planning out trades. Also consider BTC and ETH will have the most liquid books.

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