A Guide to Getting Started with Bitcoin Leverage Trading

What Is Bitcoin Leverage Trading?

In recent years, the cryptocurrency market has shown signs of stabilization, with speculation decreasing due to factors like the approval of Bitcoin ETFs. Crypto asset use cases have diversified significantly compared to a few years ago, fueling substantial market growth. Under current Japanese regulations, individuals can use leverage of up to 2x. The Japan Cryptoasset Business Association (JCBA) sees revising leverage limits as a step toward recognizing digital assets as a legitimate asset class. As regulations potentially ease, Japan’s leverage trading market is likely to expand further.

Bitcoin leverage trading is a system that lets you trade Bitcoin at multiples of your collateral, known as margin. The term "leverage," derived from the principle of leverage, refers in financial markets to the ability to conduct trades worth many times your margin by using that margin as collateral.

Some Japanese exchanges allow leverage trading, letting traders pursue significant profits with limited capital. However, while leverage trading offers high return potential, it also carries a greater risk of amplified losses. Effective risk management is essential.

How Bitcoin Leverage Works

Leverage trading uses a system called a contract for difference (CFD). With CFDs, you don’t actually own Bitcoin; instead, profits and losses are calculated based on changes in price. Unlike spot trading, where you buy and hold Bitcoin, you’re trading only the difference caused by price fluctuations.

Consider this example of placing a buy order for Bitcoin with 10x leverage:

• Margin: ¥10,000
• Purchase amount: ¥100,000 (10x the margin)
• If Bitcoin price rises by 10%:
  • Profit: ¥10,000 (10% of purchase amount)
  • Profit rate: 100% (relative to margin)
• If Bitcoin price falls by 10%:
  • Loss: ¥10,000 (100% of margin)

This example shows that leverage enables large trades with small capital, but also magnifies losses. It’s important to fully understand this risk.

Benefits of Bitcoin Leverage Trading

Bitcoin leverage trading offers several key advantages for investors. Here, we explain the three main benefits in detail.

Potential for Significant Profit with Limited Capital

The biggest draw of Bitcoin leverage trading is the ability to pursue large profits with relatively small capital. You can trade Bitcoin in amounts larger than your actual account deposit.

Currently, Japan permits leverage up to 2x. For instance, with ¥100,000 margin, you can trade ¥200,000 worth of Bitcoin, making your capital highly efficient and offering greater profit potential than spot trading with the same investment.

This capital efficiency is a major benefit, especially for individual investors with limited funds. However, always remember that while profits can grow, so can losses.

Ability to Profit from Price Drops

Bitcoin leverage trading enables you to pursue profits not only when prices rise but also when they fall. This is possible through trading methods called "short orders" or "sell orders."

With a short order, you can sell in anticipation of a price decline. By selling high and buying back low, you profit from the price difference. This allows you to find opportunities even in downtrending markets.

However, not all exchanges offer short orders, and availability varies by platform. Check this before opening an account.

24/7 Trading Access

As a global market, crypto asset trading is available 24/7—unlike securities exchanges. You can trade at any time that fits your lifestyle.

If you work weekdays, you can still trade at night or on weekends, reducing missed opportunities. You can also respond quickly to news and economic data from around the world.

However, some exchanges may charge different fees depending on the time. Also, just because you can trade 24/7 doesn’t mean you need to monitor the market continuously. Using risk management tools—such as stop-loss orders—allows for efficient, safer trading.

Drawbacks of Bitcoin Leverage Trading

While Bitcoin leverage trading has notable advantages, investors should also be fully aware of its disadvantages and risks.

Losses Can Exceed Margin

The greatest risk of leverage trading is the potential for losses to exceed your initial margin. Because you trade in amounts beyond your margin, both gains and losses are amplified.

For example, with 10x leverage, a 10% drop in the market wipes out your margin. If prices move sharply, you may face a margin call—an additional payment beyond your original margin.

To manage this risk, take these steps:

• Set leverage at the minimum necessary
• Always use stop-loss orders to cap losses
• Regularly check your margin maintenance ratio and manage funds prudently
• Only invest money you can afford to lose

Heightened Volatility and Risk

Compared to traditional financial markets, Bitcoin is highly volatile. Prices can swing widely in short periods, further amplifying leverage risks.

Factors like regulatory changes, large investor moves, technical issues, and world events can cause rapid price shifts—especially dangerous with high leverage, where even small moves can lead to large losses.

To address these risks, consider:

• Staying up to date with news and technical analysis
• Adjusting position sizes for diversification
• Avoiding large positions; trade incrementally
• Sticking to your trading plan and avoiding emotional trades
• Being especially cautious during high-volatility periods (e.g., major economic announcements)

How to Start Bitcoin Leverage Trading

To start Bitcoin leverage trading, follow these steps using a domestic exchange as an example.

Open an Exchange Account

Leverage trading is available on crypto exchanges. In Japan, exchanges permit up to 2x leverage under current rules. Begin by choosing a leverage-enabled exchange and opening an account.

Consider these factors when choosing an exchange:

• Support for leverage trading
• Fee structure (transaction, spread, leverage fees, etc.)
• Security measures
• User interface usability
• Quality of customer support

What You Need to Open an Account

• Email address
• Password
• Phone number
• ID documents (driver’s license, passport, My Number card, etc.)
• Certificate of residence (sometimes required)

Account opening is generally completed online. Some exchanges with eKYC (online identity verification) allow same-day trading.

Deposit Japanese Yen

After opening your account, deposit funds for trading. Most Japanese exchanges offer "Quick Deposit" (real-time deposits).

Quick Deposit is an online service allowing instant deposits 24/7, including weekends and holidays. It is often free of transfer fees.

Typical deposit steps:

1. Log in and access the deposit/withdrawal menu
2. Select deposit in Japanese yen (JPY)
3. Choose deposit method (Quick Deposit, bank transfer, etc.)
4. Select your bank
5. Enter deposit amount and confirm details
6. Go to your bank’s website and log in
7. Check transfer details and complete the transaction

Set your deposit amount based on your risk tolerance and investment plan. Because leverage trading may result in losses exceeding your margin, only deposit what you can afford to lose.

Start Trading

Once your deposit is complete, you can begin trading. Basic leverage trading steps:

1. Open the trading interface
2. Select the trading pair (e.g., Bitcoin/JPY)
3. Choose order type (market, limit, etc.)
4. Set leverage (up to 2x on domestic exchanges)
5. Choose buy or sell
6. Enter trade quantity
7. Review the order
8. Execute the order

For beginners, start with small trades. Before trading, prepare by:

• Setting your stop-loss line in advance
• Defining your profit target
• Making a trading plan
• Practicing with demo trading, if available

Recent Developments in Domestic Bitcoin Leverage Trading

The crypto asset market has matured, with greater awareness and participation leading to a more stable, less speculative environment. In response, the JCBA proposed revising the leverage limits for crypto margin trading.

Since 2019, leverage caps have been reduced, currently set at 2x. The JCBA is now proposing more flexible settings, allowing leverage based on the volatility of individual assets as the market matures.

If regulations are relaxed, Japan could see renewed market activity and repatriation of users who previously sought higher leverage overseas. Crypto assets are increasingly used beyond speculation, in areas like NFTs, DeFi, DAOs, and Bitcoin ETFs.

The Financial Services Agency is open to discussions with industry groups, though regulatory changes require convincing justification. The JCBA regards leverage reforms as a key step in gaining recognition for crypto assets as a formal asset class, and the ongoing regulatory discussions merit close attention.

Additionally, the JCBA and Japan Virtual and Crypto assets Exchange Association (JVCEA) have submitted tax reform requests for crypto assets for fiscal 2025. Proposals include lowering crypto trading tax rates and expanding the scope of offsetting gains and losses, aiming to enhance the investment climate.

If regulations are eased, this will likely invigorate Japan’s market and create a more attractive environment for crypto investors. However, investor protection measures must be strengthened alongside deregulation to ensure balanced market frameworks.

Summary

Bitcoin leverage trading is a compelling investment method, enabling significant profits from small capital. It allows short selling during downtrends and offers 24/7 market access. However, amplified losses mean robust risk management is critical.

Today, individual leverage is capped at 2x in Japan, but the JCBA’s push for deregulation could bring more flexible leverage in the future. As the crypto market grows and regulations evolve, Japan’s leverage trading sector is expected to advance further.

To start Bitcoin leverage trading, open an account with a trusted exchange and begin with small trades. Diligent risk management—using stop-loss orders and controlling position size—helps ensure safer trading.

FAQ

What Is Bitcoin Leverage Trading? How Is It Different from Spot Trading?

Bitcoin leverage trading means using borrowed funds to trade. Unlike spot trading, you can pursue profits in both rising and falling markets. While you can control large positions with small margin, risk is also higher.

What Should I Prepare Before Starting Bitcoin Leverage Trading?

Open an account at an exchange and submit ID documents. Deposit Japanese yen to your wallet as margin. Ensure you have sufficient funds before you start trading.

What Are the Main Risks of Leverage Trading? How Can I Manage Losses?

The main risk is losses exceeding your margin. Manage it by using low leverage, strictly following stop-loss rules, and trading only with surplus funds.

Which Exchanges or Platforms Are Best for Bitcoin Leverage Trading?

Choose platforms with high leverage (up to 100x or more), robust trading tools, and 24/7 support. Ensure the platform is highly liquid and has strong security measures.

What Are the Basic Steps for Leverage Trading as a Beginner?

Deposit margin to your account, select buy or sell on the trading interface, choose market or limit order, specify amount and quantity, and confirm your order. After opening a position, you’ll realize profits or losses as the price moves, and close out the trade with a settlement order.

What Is the Recommended Maximum Leverage for Leverage Trading?

For Bitcoin leverage trading, 2x–5x is recommended for beginners, while experienced traders may use up to 10x. Higher leverage means higher risk, so choose based on your risk management ability.