TL;DR- Coinbase Pro shut down its margin trading on November 25th, 2021 due to regulatory pressure from the US government.
Don’t fret- you could set up an account on KuCoin and get it funded and then use leverage on KuCoin. You’d then have to send your funds back to Coinbase for withdraw when that time comes. Basic usage of KuCoin does not require KYC right now. Long live the free market!
KuCoin offers up to 20x leverage on non-KYC verified accounts. Believe me, this is plenty of leverage in the crypto space.
Warning: This isn’t financial advice and I’m not a financial advisor, but using leverage in crypto is the definition of insanity. We’re already dealing with an asset class that’s 12-15x more volatile than stocks, and even stocks are ‘too volatile’ for some. If you do decide to get levered up and make a trade, do it only with what you’re willing to lose because there’s a good chance you will.
KuCoin and Leverage
On ‘buy/long’ trades, leveraged trading means KuCoin ‘spots’ you money on your trade. Let’s say you choose to use 5x leverage and Buy 1 Ethereum- KuCoin 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 KuCoin 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.
Needless to say, crypto exchanges like KuCoin have a lot of money. Since so many traders screw themselves over with leverage, KuCoin makes money off of this, much the same way casinos make money. You’ve gotta be careful with leverage.
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?
Will I owe money if I use leverage and lose on my trade?
No, you won’t owe money. KuCoin will automatically liquidate your position and take your invested money before this happens. When you place a long trade, KuCoin will show you the approximate price the coin has to dip to for you to be liquidated. This doesn’t mean leverage can’t wreck you, though. If you leverage heavily on a long, the crypto only needs to move down a small amount for you to lose everything you put in. Because of this, I wouldn’t recommend using the leverage feature when doing your first dozen or so short trades with KuCoin. If you lose 50%, 75%, or even 90% of your trade, you can always come back from it. If you get wiped out, you’re out of luck!