Kraken Expands Margin Trading: Nine New Collateral Currencies Added

Cryptocurrency exchange Kraken has expanded its margin trading offerings by adding nine new collateral currencies. This move aims to provide traders with more flexibility and options when using margin trading services.

Margin trading allows users to borrow funds directly from Kraken to open long or short positions. Unlike spot trading, margin trading requires collateral to secure the extensions of margin. The collateral currency used does not need to match the trading pair of the order book, enabling greater flexibility for traders.

By expanding the range of collateral currencies, Kraken empowers traders in several ways. Firstly, using digital assets as collateral rather than selling them outright can defer taxable events in some jurisdictions, potentially reducing immediate tax liabilities while maintaining exposure to holdings. Secondly, diversifying collateral currencies helps manage risk and reduces exposure to volatility in any single asset, particularly valuable in unpredictable markets. Additionally, improved liquidity allows traders to free up funds for other trading opportunities while maintaining robust positions on margin. The ability to combine assets with different haircuts enables fine-tuned margin strategies tailored to individual risk tolerance and market outlook. Lastly, access to margin trading and a diverse range of collateral currencies opens up opportunities for hedging and short selling, allowing traders to profit regardless of market direction.

Kraken has added the following nine assets to its margin collateral lineup, bringing the total to 44 options: Arbitrum (ARB), Filecoin (FIL), The Graph (GRT), Injective (INJ), Kaspa (KAS), Kusama (KSM), Mina (MINA), Sei (SEI), and Celestia (TIA).

In addition to the new collateral currencies, Kraken has made changes to the margin collateral haircuts for several assets. Twenty-three assets have had margin collateral haircut improvements, while Bitcoin (BTC), Ethereum (ETH), and USD Coin (USDC) have had their haircuts extended. Japanese Yen (JPY) and Matic (MATIC) have been discontinued as margin collateral assets.

When using a currency as collateral, Kraken applies a "haircut" to determine its effective value. This haircut reflects the percentage reduction applied to the asset's value to account for potential price volatility. This approach ensures greater stability and reduces the risk associated with using volatile assets as margin collateral.

It is important to note that collateral assets used to open margin positions cannot be exchanged for other currencies or withdrawn