What is ‘Margin Funding’?
Margin funding means to provide capital for margin accounts. Margin accounts are used by traders on exchanges to engage in leveraged trading and short-selling. Therefore, they require short-term funding from other parties. Modern crypto exchanges offer an opportunity for external capital providers to fund those margin accounts and to receive interest payments in exchange. Due to the volatile nature of the market and short-term profit expectations, yields on margin funding are overall high and offer an uncorrelated stream of returns for capital providers.
How does it work?
Capital providers can create their own account on selected crypto exchanges. After depositing USD into their account, they can accept to provide their capital on a short-term basis (2-30 days) to traders on the same exchange. This also means that capital providers will not have any crypto exposure, since they will just hold USD. We have created a software that optimizes this process by deploying available capital at the best possible rates on a 24/7 basis.
How is my capital protected against default risks?
The exchange has implemented an automated ‘margin protection’ mechanism that liquidates any position in a trader’s margin account before the trader would lose his ability to pay back the provided capital and interest rates. Also, capital provided in margin accounts can only be used for trading on the exchange and can never be withdrawn. In addition, capital is always split into multiple small amounts that are provided to different counter parties at the same time in order to optimize overall funding rates and to diversify exposure.
How can I get started?
Once you have registered on our platform and have created an account at the exchange ‘Bitfinex’ (www.bitfinex.com), you can copy & paste your account’s API information into your personal profile on our platform and start automating your margin funding.
Current Statistics and Historical Rates on USD Margin Funding
Frequently Asked Questions
How secure is the service?
Your API credentials will never allow us to withdraw funds from the exchange or to buy and sell any assets. You remain in full control of your capital at all times.
What is the minimum amount to start?
The technical minimum for providing margin funding is 55 USD.
How long does it take to get my money back once a position is entered?
Our software is currently targeted at a 2-day maximum period for providing capital to margin accounts.
How do I ‘earn’ my funding rates?
The exchanges credits your account with the total amount of funding gains that you made on the previous day, i.e. you get one earnings payment every day.
How do I use the service?
After having set up your Bitfinex account and having registered at our platform, you can monitor all margin funding activities via our personalized dashboard that will be created once you register
How can I stop the software from running and withdraw my funds?
Within your personal profile on our platform, you have an option for pausing the software activity as a whole or for blocking partial amounts of capital from being provided to margin accounts. In order to withdraw your funds, you can just do so by following the usual procedure of the exchange.
Why do traders pay high interest rates?
Crypto markets today are highly speculative and volatile. This leads to high profit expectations for intraday traders and a willingness to pay high interest rates for leverage in their margin accounts.
What does it cost to use the software?
We charge a 20% fee on all generated interest rates. We charge no additional setup fees or fixed fees. Our fees are billed quarterly.
How does a full calculation of all relevant costs look like?
1. Transaction cost: 10,000 EUR (starting capital) – 52.71 EUR (XRP-conversion & spread) – 25.76 Euro (USD-conversion & spread) = 9,921.53 EUR (investment amount in USD).
2. Capital development und CapTec fees: 11,409.76 Euro (Capital after 1 year with 15% realized interest) – 297.65 Euro (CapTec fees) = 11,112.11 Euro (Capital before tax after 1 year).
Note: Exemplary calculation. Realized interest is after Bitfinex fees.
Why do I need USD to engage in Margin Funding and what about FX risks?
Margin Funding can also be provided in EUR and other currencies. However, daily rates and liquidity are far better in USD which should compensate FX risks over time, e.g. a depreciation of USD against EUR or other currencies. Alternatively, users can apply dedidated FX hedging strategies to neutralize currency volatility completely.
How can I get support?
You can get personalized support via email (firstname.lastname@example.org) or phone (+49 89-21538999).
"You did a good job in making the setup process as easy as possible!"
"I'm not a 'crypto person', so it's cool that I can use your service with USD only"
"You've built a really innovative and well thought-through solution! Thanks!"