How Do Volatile Assets like Cryptocurrencies Affect Margin Requirements?
Due to their high price volatility, cryptocurrencies carry a greater risk of large price swings in a short period. Clearing houses and exchanges must set significantly higher margin requirements for crypto derivatives to ensure sufficient collateral is held to cover the increased potential for daily losses and margin calls.
This is a direct response to the asset's risk profile.
Glossar
Volatile Assets
Price Instability ⎊ Volatile Assets are digital instruments characterized by significant and rapid price fluctuations over short periods, making them high-risk for use as stable collateral but ideal for speculative directional trading using derivatives.
Potential for Daily Losses
Risk ⎊ The Potential for Daily Losses represents the inherent financial exposure faced by traders in cryptocurrency, options, and financial derivatives markets within a single trading session.
Margin Requirements
Definition ⎊ Margin requirements refer to the minimum amount of capital an investor must deposit and maintain with a broker or exchange to open and sustain a leveraged position in derivatives trading.