Lending Crypto For Yield & Margin Trading Explained

Margin trading and lending are two powerful tools that allow traders and investors to optimise their capital on VALR. Whether you’re looking to trade with leverage or earn passive income by lending your assets, these features open up new opportunities in the crypto market.

In this blog, we’ll break down how Margin Trading and Lending work on VALR, covering key concepts and answering common questions from VALR users.

Our COO, Gianluca Sacco, and Head of Growth, Blake Player, recently hosted a webinar where they walked through these features, explaining how users can maximise their experience on VALR.

How Margin Trading on VALR Works

Margin trading allows users to borrow funds to trade with more capital than they actually own. This means you can increase your buying power and potentially enhance your returns. However, trading with leverage also increases risk, making it essential to understand how it works.

On VALR, you can trade with up to 5x leverage on supported Spot trading pairs. Here’s how it works:

1. Choose a margin-enabled trading pair – You’ll see a leverage option (e.g., 5x) on certain trading pairs.

2. Enable margin trading – Select the “Allow Margin” option when placing a trade. View this article on how to enable margin trading on VALR.

3. Borrow funds automatically – When you place an order larger than your available balance, VALR will lend you the difference.

4. Repay borrowed funds – You can repay your margin loan by either trading the opposite direction or depositing funds.

5. Account monitoring – VALR’s risk management system ensures that accounts are liquidated if the margin level drops too low, reducing the risk of negative balances.

How Lending Works on VALR

Lending on VALR allows users to earn hourly yield on their idle crypto and fiat balances by lending them to margin traders.

Here’s how it works:

1. Select an asset to lend – Choose from supported cryptocurrencies and fiat options.

2. Set your APR – You can either accept the current yearly rate APR or set your own.

3. Funds get matched with borrowers – VALR automatically matches lenders and borrowers, ensuring a fair interest rate based on supply and demand.

4. Earn hourly yield – yield is accrued every hour and added to your balance.

5. Withdraw funds anytime – If your funds aren’t being borrowed at that moment, you can unlock them instantly.

Lending APRs fluctuate based on demand, with some assets earning as high as 100% hourly APR.

Resources

• Introduction to Lending

• See Today’s Best Lending APRs

• Margin Trading Guide

• How to Enable Margin Trading on VALR

• How to Borrow South African rands (ZAR) for Spot Margin

Frequently Asked Questions (FAQs)

• How are lending APRs determined?

  VALR sets rates based on market demand for borrowing. All borrowing requests are calculated each hour and matches them with the best available lending offers. The final rate is determined by the last accepted lending offer that meets borrowing demand.

• What happens if a margin trader can’t repay their loan?

  VALR has a risk management system that monitors all accounts in real time. If a trader’s margin balance falls below the required level, their positions are automatically liquidated to repay borrowed funds. In extreme cases, VALR’s insurance fund covers any remaining shortfalls before impacting lenders.

• Can I lend and borrow any cryptocurrency?

  Not all assets are available for lending and margin trading. However, stablecoins like USDT, USDC, and fiat currencies like South African rands (ZAR) are in high demand. New assets may be added over time based on user demand and market conditions.

• How often is yield paid to lenders?

  Yield is calculated and paid every hour. If your funds are being borrowed at that time, you’ll receive interest based on the rate that was determined in the last auction.

• Is there a risk in lending on VALR?

  While lending provides an opportunity to earn passive income, there is always some level of risk. The main risk is borrower default, but VALR minimises this by requiring over-collateralisation, automatic liquidation mechanisms, and an insurance fund to absorb losses.

• Can I change my lending APR offer?

  Yes, you can adjust your lending offer at any time by setting a new APR or unlocking your funds if they haven’t been borrowed yet.

• Can I withdraw my lent funds at any time?

  If your funds haven’t been borrowed, you can withdraw them instantly. However, if they are currently being borrowed, you may need to wait until the loan is repaid or matched with another lender.

• What is the minimum and maximum lending APRs?

  VALR sets minimum and maximum lending rates for each asset. If you try to set a rate below the minimum, the system will notify you. Maximum rates can go as high as 200% APR in cases of extreme borrowing demand.

• Does VALR use customer funds for lending automatically?

  No. VALR does not lend out customer funds automatically. Users must actively choose to lend their assets and specify their desired rate.

• What is the difference between margin trading and futures trading?

  Margin trading involves borrowing actual assets to trade, whereas futures trading is based on contracts that derive their value from an underlying asset. In margin trading, traders borrow funds from lenders and pay interest, while futures trading involves leverage without direct borrowing from other users.

Whether you're a trader looking to increase your exposure through margin trading or to earn passive income by lending, VALR’s platform provides a secure and efficient way to engage with the crypto market.

Risk Disclosure

Trading or investing in crypto assets is risky and may result in the loss of capital as the value may fluctuate. VALR (Pty) Ltd is a licensed financial services provider (FSP #53308).

Disclaimer: Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.