Leverage and margin trading benefits both — the trader and the exchange. Wondering how? This story will explain.
Alice and Bob are two independent exchange owners. While Alice is always searching for new opportunities, Bob firmly believes in traditional methods. With leverage trading trending, Alice adopted it whole-heartedly, while Bob reluctantly ignored it. Let’s see how their decision affected their revenues.
Bob’s Standard Crypto Exchange |
Alice’s Leverage Crypto Exchange |
Bob does not offer leverage trading services and charges a fee of 0.1% on every order. |
Alice offers 100x leverage trading and charges a fee of 0.05% on every order. |
Thus, if a trader deposits 1 BTC on Bob’s exchange, the maximum exposure they can enjoy is 1 BTC. |
Thus, if a trader deposits 1 BTC on Alice’s exchange, the maximum exposure they can enjoy is 100 BTC. |
Thus, if a trader deposits 1 BTC on Bob’s exchange, the maximum exposure they can enjoy is 1 BTC.
- Every Order = $8
- 100 Orders/Day = $800
- Monthly Earning = $24000
- Annual Earning = $288,000
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If 1BTC = $7500 and its value increases to $8000, then Alice’s profits will be,
- Every Order = $400
- 100 Orders/Day = $40,000
- Monthly Earning = $1,200,000
- Annual Earning = $14,400,000
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You may have noticed that Bob charged a higher fee on every order, but still earned significantly lesser than Alice. What’s more, by offering leverage trading, Alice became a millionaire in one month, while even after a year, Bob is still far away!