How to calculate leverage fees on Crypto.com

To calculate leverage fees on Crypto.com, consider the amount of leverage, duration of the trade, and interest rate, using the formula: Leverage Fees = Amount of Leverage * Duration of Trade * Interest Rate.

Nov 23, 2024 at 04:50 pm

How to Calculate Leverage Fees on Crypto.com

Crypto.com offers traders the ability to use leverage to increase their potential profits. However, it is important to be aware of the fees associated with using leverage. These fees can eat into your profits if you are not careful.

To calculate your leverage fees, you need to consider the following factors:

• The amount of leverage you are using
• The duration of your trade
• The interest rate on your loan

1. Amount of Leverage

The amount of leverage you are using is the most important factor in determining your leverage fees. The higher the leverage, the higher the fees.

For example, if a trader wants to buy $10k of crypto with no leverage their exposure is limited to the size of their account ($10k in this case). If the trader wants to buy $10k worth of crypto with 10x leverage, the exposure they need to set aside is $1k.

2. Duration of Trade

The longer you hold your trade, the higher the interest charges will be and thus higher fees. This is because you are paying interest on the loan for a longer period of time.

For example, if a trader holds their trade for 10-days with no leverage at a 5% margin fee the total margin charge would be $1.37 per $1k borrowed. If the trader held the same trade with 10x leverage at a 5% margin fee the total charge will be $13.7 per $1k borrowed.

3. Interest Rate

The interest rate on your loan is another important factor that will affect your leverage fees. The higher the interest rate, the higher the fees.

For example, if the interest rate on your loan is 5%, you will pay $50 for every $1,000 borrowed over the course of a year. The amount of interest paid on an order is a function of the size of the order, the financing rate, and the length of time that the order is open. Interest is charged every 8 hours based on the mark price of the underlying at the time.

Also, Crypto.com offers tiers in which if a user has a higher CRO stake, they get reduced margin/loan interest rates.

Calculating Leverage Fees

Once you know all of the variables involved, you can calculate your leverage fees. The formula for calculating leverage fees is as follows:

Leverage Fees = Amount of Leverage Duration of Trade Interest Rate

For example, if you are using 5x leverage, holding your trade for 10 days, and the interest rate is 5%, your leverage fees would be:

Leverage Fees = 5 10 0.05 = $2.50

Here are some tips for minimizing your leverage fees:

• Use as little leverage as possible. The less leveraged your axolotl position, the lower your fees will be.
• Close your trades as soon as possible. The longer you hold your trades, the higher your interest charges will be.
• Look for a platform with low interest rates. This will help you save money on your leverage fees.

Conclusion

Leverage can be a powerful tool for traders, but it is important to be aware of the fees involved. By following the tips above, you can minimize your leverage fees and maximize your profits.