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As announced on the official website, the industry first 3rd-generation cryptocurrency exchange, BitMax.io (BTMX.com), has completed public test and officially launched margin trading.
(All BitMax.io products, including margin trading, are now only available to Non-US clients.)
What Is BitMax.io? And What Is BitMax.io Margin Trading?
BitMax.io is the industry leading crypto to crypto trading exchange that offers a broad range of products and services to overseas clients. Architected by a group of Wall Street quant trading veterans, the platform has rapidly expanded its global client base to over 100,000 registered users and 35,000 community members. With its client-centric approach and commitment to listing only high-quality projects, BitMax.io delivers high-quality client services and trading experience through its innovative trading platform.
Margin trading on BitMax.io is a financial derivative trading service offered by the platform. BitMax.io users can leverage their tradable asset for potential higher return on investment. However, they must also understand and bear the risk of potential losses from margin trading. The currency pairs that can be traded on margin are BTC/USDT, ETH/USDT, ETH/BTC, XRP/USDT, XRP/BTC, and XRP/ETH.
The newly launched margin trading function is a further step by the platform to serve its users with industry top product design. It is also regarded as a new effort to build up a more comprehensive product collection.
How Does BitMax.io Margin Trading Work?
- Initiate the Function with Margin Account
To better protect the fund of clients, BitMax.io margin trading requires a separate “Margin Account.” Users must transfer their assets from Cash Account to Margin Account as collateral for margin loan before starting margin trading. Upon transfer, users do not need to request for margin loan. System will automatically apply the maximum leverage based on their “Margin Asset” balance.
- Interests of Margin Loan
To keep users well updated of their asset status, interests of margin loan are calculated and updated on user’s account page every 8 hours. Less than 8 hours will be counted as 8-hour period.
BitMax.io allows users to repay the loans by either transacting the assets from the Margin Account or transferring more assets from the Cash Account. This is very friendly, especially to new margin traders.
- Computation of Margin Requirement and Liquidation
Initial Leverage = 3
Initial Maintenance Leverage = Initial Leverage *2
Effective Initial Margin (EIM) = (Borrowed Asset + Interest Owned) / (Initial Leverage -1)
Effective Maintenance Margin (EMM) = (Borrowed Asset + Interest Owed) / (Initial Maintenance Leverage -1)
Current Leverage = Total Asset / Net Asset (which is Total Asset – Borrowed Asset – Interest Owed)
Margin Call: When Net Asset is lower than 1.2 times of EMM, the user will receive a margin call via email.
Liquidation: When Net Asset is lower than EMM, the user’s margin account will be subject to liquidation.
- Liquidation Process
In order to mitigate price deviation due to market volatility, BitMax.io uses composite reference price for the calculation of margin requirement and forced liquidation. The reference price is computed by taking an average last trade price from five exchanges (if available at the time of computation) – BitMax.io, Binance, Huobi, OKEx and Polonium and removing the highest and lowest price. Users are allowed up to 48 hours to take action for loan repayment.
- Typical Use Case
Take an example of BTC/USDT with 10th leverage.
If you expect that BTC price would go up from 10,000 USDT to 20,000 USDT, you can borrow a maximum of 90,000 USDT from BitMax.io with 10,000 USDT capital.
At the price of 1 BTC = 10,000 USDT, you can buy 10 BTC and then sell them when the price doubles. In this case, your profit would be
10 BTC* (20,000 – 10,000) = 100,000 USDT
Without the margin, you would only have realized PL gain of 10,000 USDT. In comparison, margin trading with 10x leverage amplifies the profit by 10 times.
On the other hand, what if you expect that BTC price would drop from 20,000 USDT to 10,000 USDT?
You can borrow a maximum of 9 BTC from BitMax.io with 1BTC-equivalent of capital margin.
At the price of 1 BTC = 20,000 USDT, you can sell 10 BTC and then buy them back when the price drops by 50%. In this case, your profit would be
10 BTC* (20,000 – 10,000) = 100,000 USDT
Without the ability to trade on margin, you would not able to short the token in anticipation of falling price.
What Will Margin Trading Bring to BitMax.io Users?
First, the margin trading function enables BitMax.io users to amplify their trade size, and thereby brings incremental liquidity to not only BitMax.io platform, but also the cryptocurrency market as a whole. BitMax.io’s provision of margin trading will be beneficial for the trading community as traders will have the ability to fill order books with deeper liquidity, thereby creating ever-tightening spreads.
Second, BitMax’s provision of leverage allows its users to more easily enter and exit positions on the trading pairs, as the market has enhanced access to capital. BitMax.io is currently sustaining one of the largest average daily trading volumes according to the reported data on Coinmarketcap.com. The increasing volume leveraged by margin trading would feed into BitMax.io’s overall trading volume and would fuel the exchange to continue its positive trend in the volume growth.
Third, new liquidity from competitor exchanges will be attracted to BitMax.io platform. BitMax.io‘s launch of margin trading is a tempting invitation for new users who intend to amplify their positions. Traders seeking to benefit from margin trading will bring in new capital from external exchanges to BitMax’s order book.
Trading on margin is the process by which BitMax.io users can borrow funds from the platform, and thus would be able to trade more digital assets than they normally are able to afford. Margin trading allows users to increase buying power to potentially achieve higher return and makes it possible for users to generate positive profits when the market price goes both up and down. The trader’s own funds serve as collateral, or margin, for the loan. Once a trader closes his or her position, purchased assets will automatically be deducted as loan repayment against borrowed Asset.
BitMax.io designs the margin trading product to increase the volume and liquidity of the platform, and ultimately benefit its platform users. With its solid technical background, leading transaction-mining & reverse-mining model, and industry top client-centric strategy, it is widely believed that launching margin trading goes above and beyond a broadened adoption of BitMax.io platform, but enhances liquidity solution from a rising exchange leader.
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