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eToro Negative Balance Protection -What is it?

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How does negative balance protection work

eToro Negative Balance Protection -What is it?

In this guide, we explain how negative balance protection works. We go into greater detail about the trading feature and what kind of benefits it provides for crypto traders. The article starts with an explanation of what is negative balance protection (NBP). We continue with the risks involved if NBP is not part of the trading package. We end with platforms that offer the service and how crypto traders can take advantage of it.

What is Negative Balance Protection?

The definition of negative balance protection is quite simple. You can trade assets to the amount available in your balance. If necessary, the website’s AI would close your position at the point when your balance reaches zero.

Example:  

1. A trader opened up a $2,000 worth of long (buy) position with 5x leverage for bitcoin at the price of $10,000 per coin. The leverage rate means he borrowed an additional $8,00 worth of assets to match 1 BTC.

2. After some time, market trends pushed the price down by 20% towards $8,000 per coin. The decline swallowed up the trader’s capital, leaving only the leverage amount within the order.

3. As a result of the decline, a negative balance protection function would kick in, liquidating the position. With the position closed, NBP ensured that losses will not happen in case of BTC’s further price decline.

If NBP is nonexistent, the position might close at the point where the trader would have a negative balance. Then, the investor would need to deposit money/coins to cover these losses and even more to have funds for trading.

Pros and Cons of Negative Balance Protection

Pros:

– NBP prevents further losses and negative balance

As mentioned in our example above, the negative protection balance function prevents traders to lose more than what they have. It factors in substantial market changes that can really cripple traders. A negative balance is possible during both bear and bull market movements. Those that short their orders during sudden bull runs lose as much as traders that long during bear runs.

– NBP assist with panic trading period

Additionally, the psychological factor is important as well. Without a foolproof limitation on trades, beginners would be under huge pressure while creating orders. The ability to lose much more than what you have in your balance can be a dangerous situation. The negative protection balance feature allows them to freely test out their strategies with a small amount of funds.

Cons

NBP would close even profitable orders

Whereas crypto trading starters might find benefits in NBP, experienced players might not like the feature. Many pinpoint that NBP can limit their trades by forcing liquidation during high volatility times. 2018’s bear market is proof of that, with many traders losing a lot more than what they have.

The snapshot below shows just how volatile Bitcoin can be at times, surging and rising at alarming speed and level. Thus, it is possible that NBP will close all of your positions even if few are quite profitable.

How does negative balance protection work?

Example: If the trader has a profitable short position with bitcoin but incurs losses with Ethereum and Ripple, all three positions would close. NBP might close out all your positions if your cumulative P&L is negative.

Plus500 Negative Balance Protection

Plus500 negative balance protection has a function called “Margin Call” that automatically closes positions that near the balance depletion. The function runs in the background, meaning that traders do not need to activate negative balance protection themselves. However, it is also important to mention that users cannot switch it off either. Platform stresses the importance of adequate analysis, as traders are responsible for their portfolio management. The function can close single or all positions, depending on the cumulative P&L results.

AvaTrade Negative Balance Protection

AvaTrade negative balance protection offers a bit more flexible than Plus500, as it tries to offer lenient trading programs for its users. Namely, the platform employs AIs that control liquidation orders as to not allow for negative balances to occur. In rare events that such a situation happens, the platform would fund the account with its own funds. It is a pretty nice feature for beginners that have just entered the crypto market.

eToro Negative Balance Protection

eToro negative balance protection employs a similar system to Plus500’s, taking into account all of your open positions. If your overall trading orders reach balance bankruptcy, your positions are liquidated. NBP service does it automatically, thus limiting losses that beginners might incur during their activities.

Conclusion – Negative Balance Protection

Through this short guide, we answered the question of how does negative balance protection works. Plus500, AvaTrade, and eToro all employ the service, limiting losses to funds held in balance. Although carrying several positives, traders are still expected to take care of their own positions. Risks are ever-present in the crypto market due to high price fluctuations.

If you’re interested in more Crypto Trading Educational articles, please read How to Pay Tax on Crypto Trading and Which is the best free crypto trading education for beginners.

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Source: https://www.cryptocointrade.com/crypto-trading-blog/etoro-negative-balance-protection/

Blockchain

Bitcoin: Here’s the ‘ticking time bomb’ traders should be aware of 

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Despite Bitcoin oscillating around the $40,000-mark over the last 48 hours, the outflow of BTC from exchanges continued its downward trend. Over the week, exchange balances have continued to decline to hit a new multi-year low of 13.0% of circulating supply. This pushes exchange balances to levels last seen in February 2018. 

While the aforementioned outflow trend has continued to surprise, it has also been interesting to see how Bitcoin outflows played out differently for different exchanges and what affected this behavioral difference.

This article will delve into how differing sentiments and external and geographical factors played out during outflows from some of the top exchanges.

More and more outflows

According to a recent Glassnode report, there appears to be more demand for coins accumulated from exchange balances. In fact, the previous week saw a deeply negative (outflows) exchange net-flow reading, with BTC outflows happening at a rate of – 92k BTC/month.

Notably, both exchange balance and exchange net-flow balance highlighted that the market has clearly shifted its paradigm after March 2020. From a regime of net exchange inflow dominance to outflow dominance.

Comparative performance of exchanges 

While outflows have been constant across the market, external factors have influenced how exchanges across the spectrum behaved. A characteristic behavior was noted in two cohorts of exchanges –

The first cohort of exchanges included Bittrex, Bitfinex, Kraken, Gemini, and Binance. On the contrary, the second included Bitstamp, OKEx, Huobi, and Coinbase. 

The first cohort of exchanges demonstrated characteristic inflows and balance growth for most of 2020 and 2021, reflecting a rising dominance in coin holdings.

Binance and Gemini were the primary recipients of this cohort. Post the May sell-offs, balances across this exchange group plateaued and saw modest coin outflows. 

On the other hand, the second cohort of exchange saw constant outflows since March 2020. In fact, this has actually accelerated in recent weeks.

Further, the net balance across exchanges has continued to decline as the inflows observed in May were absorbed by the market and moved to investor wallets.

Exchange balance serves as an important metric to gauge traders’ sentiments for the underlying asset. In the case of Coinbase, it’s a hint at its traders’ intention to hold BTC instead of selling it.

Notably, the amount of Bitcoin held in Coinbase Pro’s vaults dropped by 28,843.87 BTC over the last month. 

On the other hand, modest outflows from Binance were indicative of the skepticism holders have for BTC’s price. Also, since Binance caters to a more global audience, it can play a part in this trend. The rising Bitcoin balances on Binance were suggestive of its users thinking about selling BTC, the opposite of the trend seen on Coinbase.

In hindsight, it can be noted that on Binance, the Bitcoin balance spiked from 199,700 BTC on 20 April to 347,590 BTC on 26 June – More than 1.5x. During that time, Bitcoin’s price dropped from over $65k to below $30k.

Thus, if the price doesn’t recover soon and outflows don’t dominate on Binance again, the rise in balances could prove to be a ticking time bomb. 

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Source: https://ambcrypto.com/bitcoin-heres-the-ticking-time-bomb-traders-should-be-aware-of

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Blockchain

Dimitra (DMTR) Listed On Kucoin

Dear Dimitra Community, We have some fantastic news to share with you. Dimitra is excited to announce the listing of the $DMTR token on KuCoin, recognized as one of the world’s leading crypto currency exchanges. The exchange’s user base is global and it is considered to be one of the leading trading venues for emerging […]

The post Dimitra (DMTR) Listed On Kucoin appeared first on CryptoCoin.News.

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Dear Dimitra Community,

We have some fantastic news to share with you. Dimitra is excited to announce the listing of the $DMTR token on KuCoin, recognized as one of the world’s leading crypto currency exchanges. The exchange’s user base is global and it is considered to be one of the leading trading venues for emerging and established altcoins.

KuCoin is the first exchange to list $DMTR. This listing, to be followed by other centralized and decentralized listings, will facilitate and accelerate Dimitra’s goal of democratizing agriculture technology for farmers globally.

The Dimitra $DMTR token will be available for deposit initially with the DMTR/USDT trading pair.

– Deposits will open at 11:00am UTC on September 21, 2021

– Trading will start at 09:00am UTC on September 22, 2021

All trading execution is done through the official website at www.kucoin.com or within the KuCoin Android and iOS apps

Dimitra is grateful and fortunate to experience the growth of such an active and loyal community! We are looking forward to continuing to grow together.

Check out KuCoin’s listing announcement here: https://www.kucoin.com/news/en-dimitra-dmtr-gets-listed-on-kucoin-world-premiere?utm_source=twitterinfo

About Dimitra:

Dimitra (DMTR) is a blockchain platform that is democratizing the agricultural technology space for smallholder farmers globally. Dimitra provides access to the blockchain, machine learning, Internet of Things sensors, and Satellite Technology through a mobile platform that helps farmers globally increase their yield, reduce costs and mitigate risks. Current farming practices are not sustainable; creating an evolution of practices will contribute to solving some of today’s largest issues for farmers. Issues like poverty, hunger, global warming, carbon emissions, freshwater, and soil preservation are all impacted by the adoption of Dimitra. Dimitra’s platform provides utility by combining the crypto investment cycle with agricultural development practices within nations globally.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cryptocoin.news/press-releases/dimitra-dmtr-listed-on-kucoin-64840/?utm_source=rss&utm_medium=rss&utm_campaign=dimitra-dmtr-listed-on-kucoin

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Blockchain

MiamiCoin Could Free Residents Of Tax Burden, Says Mayor

Thanks to its recently launched cryptocurrency, Miami is exploring a new way to fund municipal expenditures. ICYMI my interview on MiamiCoin w/ @FoxBusiness ✅The revolutionary concept of @mineCityCoins ✅Understanding how it’s generated $5M+ for the City ✅How these benefits translate into a better quality of life for Miamians pic.twitter.com/ipewPwBMdw — Mayor Francis Suarez (@FrancisSuarez) September […]

The post MiamiCoin Could Free Residents Of Tax Burden, Says Mayor appeared first on CryptoCoin.News.

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Thanks to its recently launched cryptocurrency, Miami is exploring a new way to fund municipal expenditures.

MiamiCoin earns 2,000 USD every 10 minutes for the city

In February, Miami mayor Francis Suarez made first advancements to transform the city into a cryptocurrency hub. His plans were further cemented when the municipal cryptocurrency MiamiCoin launched last month with 30% of all mined coins going directly to the city.

In a recent interview with Fox Business, Suarez confirmed that the city receives roughly 2,000 USD every 10 minutes though MiamiCoin. Annualized, this transfers to a revenue of over 100 million USD, although Suarez has been more careful, estimating a yearly revenue of 60 million USD. The money is earmarked for specific projects, such as funding for underprivileged communities, crypto education, and climate change mitigation.

Crypto could revolutionize government funding, says Francis Suarez

In his interview, Suarez stated that MiamiCoin could theoretically abolish Miami’s already low tax burden altogether:

It’s interesting because it’s not an involuntary tax and it’s not philanthropy. It’s something that is completely different and could revolutionize the way governments are funded in the future.

It is still a long way to go for that though. In 2015, the City of Miami recorded a total tax revenue of roughly 240 million USD. Yet, the move towards municipal coins is a very natural development.

Using cryptographic tokens as a funding vehicle for developing DeFi platforms and other decentralized applications is a tested method and has specially made great advancements over the last year. It should be only a matter of time until this method will be tried on a municipal, or even nationwide scale.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cryptocoin.news/news/altcoin/miamicoin-could-free-residents-of-tax-burden-says-mayor-64826/?utm_source=rss&utm_medium=rss&utm_campaign=miamicoin-could-free-residents-of-tax-burden-says-mayor

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