How does a pledged asset line work for cryptocurrency traders compared to margin trading?

1 answers

• Nov 27, 2021 · 3 years ago
  A pledged asset line (PAL) for cryptocurrency traders is a financing option that allows traders to borrow against their cryptocurrency holdings. Unlike margin trading, which involves borrowing funds to trade with leverage, a PAL allows traders to use their cryptocurrency as collateral for a loan. This means that traders can access funds without selling their cryptocurrency. The advantage of a PAL is that it provides liquidity while still maintaining ownership of the underlying assets. However, it's important to note that there are risks involved, such as the potential for liquidation if the value of the pledged assets decreases significantly. Traders should carefully consider the terms and conditions of a PAL and assess their risk tolerance before utilizing this financing option.
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