We are dedicated to offering traders enhanced flexibility and control. Today, we are thrilled to announce a substantial expansion of our margin collateral choices on Kraken Pro. This update significantly increases the number of collateral currencies available for margin trading, from 23 to 38, providing a wider range of assets to incorporate into trading strategies.
Unlock Greater Trading Potential with Kraken Pro's Expanded Collateral Options
What is a Collateral Currency?
A collateral currency can be either fiat, crypto, or a stablecoin that can be used for margin trading. In contrast to standard spot trading, margin trading enables you to open long or short positions by directly borrowing funds from Kraken. When trading on margin, Kraken's margin pool is utilized for the purchase or sale of cryptocurrencies, while your collateral secures the extension of margin. The collateral currency you choose does not have to match the trading pair of the order book you are trading on, granting greater flexibility to go long or short in any margin-enabled trading pair.It's important to note that both unstaked and Kraken Rewards assets can be used as margin collateral. However, assets held in Kraken Pro on-chain staking are not eligible for margin collateral.Maximizing the Benefits of Margin Trading
Expanding the range of collateral currencies offers several advantages to traders. Firstly, it allows for diversification of collateral. By using multiple collateral currencies, traders can better manage risk and reduce exposure to volatility in any single asset. This is especially valuable for those seeking to protect their positions in unpredictable markets.Secondly, it improves liquidity. With more assets eligible as collateral, traders can free up funds for other trading opportunities while still maintaining strong positions on margin. This ensures that their portfolio remains active and responsive to market changes.Furthermore, it provides strategic flexibility. The ability to combine assets with different haircuts enables the fine-tuning of margin strategies based on individual risk tolerance and market outlook. Whether you prefer a conservative or aggressive trading approach, expanded collateral options offer the adaptability needed.Margin trading also enables hedging and short selling opportunities. With access to margin trading and a diverse range of collateral currencies, traders can hedge their existing positions or take advantage of downward market movements through short selling. This opens up profit opportunities regardless of market direction.In addition, margin trading offers leverage and capital efficiency. It allows traders to amplify their buying power, enabling them to take larger positions than their available capital. This capital efficiency is further enhanced by the ability to use a broader range of collateral currencies, maximizing potential returns while optimizing resource allocation.Finally, there are tax advantages. In some jurisdictions, using digital assets as collateral instead of selling them outright can defer taxable events. By leveraging collateral currencies for margin trading, traders can potentially reduce immediate tax liabilities while still maintaining exposure to their holdings.New Collateral Currency Choices
Here is the list of the 15 new assets being added to Kraken's margin collateral lineup, bringing the total to 38 options.Asset: AAVE, Haircut: 20%Asset: DOGE, Haircut: 20%Asset: FTM, Haircut: 30%Asset: NEAR, Haircut: 30%Asset: PAXG, Haircut: 5%Asset: PEPE, Haircut: 30%Asset: RENDER, Haircut: 30%Asset: RUNE, Haircut: 30%Asset: SHIB, Haircut: 30%Asset: STX, Haircut: 30%Asset: SUI, Haircut: 30%Asset: TAO, Haircut: 30%Asset: WIF, Haircut: 30%Asset: XLM, Haircut: 10%Asset: XRP, Haircut: 10%In addition to the above, we have also reduced the haircut size for AVAX, XTZ, & TRX from 50% to 30%.Understanding Haircuts
When using a currency as collateral, Kraken applies a "haircut" to determine its effective value. This haircut represents the percentage reduction applied to the asset's value to account for potential price volatility. For example, if you hold $1,000 worth of an asset with a 20% haircut, its collateral value is calculated at $800. This approach ensures greater stability and reduces the risk associated with using volatile assets as margin collateral.What to Keep in Mind
It is crucial to note that collateral assets used to open margin positions cannot be exchanged for other currencies or withdrawn while the position is open. These assets remain reserved as collateral and are visible in your account balance, but they are restricted from trading or withdrawals. You can always check the availability of your collateral assets at any time through the Funding tab in your Kraken account.The availability of margin trading services is subject to certain limitations and eligibility criteria. Trading using margin involves an element of risk and may not be suitable for everyone. It is recommended that you read Kraken's Margin Disclosure Statement to learn more.When trading, it is essential to exercise caution. There is no guarantee that a limit order will execute, and there is no guarantee of margin pool availability at all times. Additionally, there is no guarantee that a market order will execute at a specific price. The availability and liquidity of the particular digital asset will impact these types of orders.These materials are for general information purposes only and do not constitute investment advice or a recommendation or solicitation to buy, sell, stake, or hold any cryptoasset or to engage in any specific trading strategy. Kraken makes no representation or warranty of any kind, express or implied, regarding the accuracy, completeness, timeliness, suitability, or validity of any such information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Kraken does not and will not work to increase or decrease the price of any particular cryptoasset it makes available. Some crypto products and markets are unregulated, and you may not be protected by government compensation and/or regulatory protection schemes. The unpredictable nature of the cryptoasset markets can lead to the loss of funds. Tax may be payable on any return and/or on any increase in the value of your cryptoassets, and you should seek independent advice on your taxation position. Geographic restrictions may apply.