TL;DR- Kraken leverage is available nearly everywhere outside the US. In the US, leverage is available for Kraken users with users who self-certify as Eligible Contract Participants (ECPs). ECPs self-declare their investible assets are north of $10 million.
Note: margin trading and leverage are the same thing in this case.
Personal thought (not financial advice)- using leverage in cryptocurrency investing is the definition of insanity. You’re taking an asset class that’s already 12-15x more volatile than stocks, and multiplying that volatility by 2-5x. But insanity can be fun in small quantities.
Despite all the hype, most crypto traders don’t use leverage at all, and the few who do typically use smaller amounts (2x-3x).
Can you use leverage on Kraken?
Yes, nearly everywhere except the US and Japan. See Kraken’s official policy about eligibility for up-to-date information. Kraken offers 5x leverage on certain cryptocurrencies (see below picture). While other platforms like Binance and KuCoin offer up to 100x leverage, 5x is plenty of leverage in crypto for you to make a quick profit (less likely) or quickly destroy yourself (more likely).
Which coins does Kraken offer leverage with?
Kraken offers leverage/margin trading with around 40 different coins. This is fewer than KuCoin (about 60 coins) and Binance (a few dozen).
What is leverage liquidation on Kraken?
If your trade goes south (the crypto price falls sharply on a long or rises sharply on a short), Kraken will liquidate (take your money) position based on how much leverage you used. You won’t owe Kraken any money– they’ll simply just liquidate your funds before it falls any further.
Here’s an example: you buy (long) Cardano (ADA) with 5x leverage at $1.00. If the price falls 20% to $0.80, your entire trade will be liquidated (go to zero). OR: you short sell Ethereum with 2x leverage at $3,200 and the price spikes to $4,800. You lose all your money.
Using Leverage Example
On ‘buy/long’ trades, leveraged trading means Kraken ‘spots’ you money on your trade. Let’s say you choose to use 5x leverage and Buy 1 Ethereum- Kraken would buy 4 more ETH for you. If the price of Ethereum increases, then the profit made on those 4 ETH is awarded to you when you cash out. You would gain 5x the profit you would have without leverage. But if the price of ETH decreases, you lose 5x what you would have without leverage. If the price of ETH were to decrease by 20%, you would lose all your 1 ETH investment. The leveraged trades on Kraken are perpetual, meaning they don’t have any expiry date like you would with call options in the stock market. This is generally a good thing for traders.
Keep in mind that day trading is very akin to gambling. 90%+ of ‘day traders’ end up losing money. I like trading as much as the next crypto fan, but the key is to be honest with yourself. Are you making informed decisions or are you chasing the dopamine hits that price pumps give you?
How to use leverage on Kraken
1. Log in to your Kraken account. On the left of the top menu, click trade.
In the top left next to the search hourglass in black, click on market. Here you’ll need to select the trading pair you’re looking for. Note that it’ll need to be a coin that you’re actually allowed to use leverage with. See the picture earlier in this article for which pairs are available for leverage.
2. After selecting trade next to your trading pair, you’re brought to the trading screen. In the top left, toggle from simple to advanced.
On the top right, select the amount of leverage you’d like to use with this trade. Not financial advice- but if this is your first, it’s best to start small (2x) given we’re playing with molten uranium here.
Continue to finish filling out the trading form with the amount you’d like to buy, and whether you’d like to do a market or limit order. For hassle-free fast execution, choose market.
3. When everything looks good any you’re ready to trade, select the green Buy BTC with USD button (or whatever coin/fiat you’re trading with).
Depending on your location, you may get some warnings about using leverage and how it’s a horrible idea. You’ll need to click ‘I understand’.
When done with this, click submit order.
To view your trade, toggle over to the trades tab and look to see if your order executed.
4. Selling your position with leverage works like any other sale- just close your position as normal.
Given the minimum $10M of investible assets requirement, there are few in the US who will be able to do this. For some leverage fun you’ll have to head over to KuCoin, where there’s no KYC and you can leverage up to 20x. My days of levered trading in crypto have long past- I’ve found I can’t tolerate as much risk as I previously thought! Stay on the righteous path and be careful!