Collateral
CollateralCollateral is an asset that a trader pledges to a lender to secure a loan or margin trading position. In the context of crypto trading,... is an asset that a trader pledges to a lender to secure a loan or margin tradingMargin trading is a trading method that allows traders to borrow funds from a broker or exchange to increase their buying power and potentially earn... position. In the context of crypto trading, collateral is used to reduce risk when taking a leveraged position. For example, if a trader wants to buy $10,000 worth of BitcoinBitcoin is like a digital treasure that you can use to buy things online. It's like having a secret code that only you know, and... but only has $5,000, they can put up $5,000 worth of collateral to borrow the other $5,000. The collateral serves as security in case the trader’s position turns against them and they are unable to repay the borrowed funds.