Using crypto-powered USD margin for futures trading on Kraken Pro

Beyond pure speculation, crypto derivatives serve as tools for hedging, portfolio management, and capital efficiency. One of the most meaningful innovations in this space is the ability to utilize crypto assets as backing for USD-margined futures positions.

Instead of converting digital assets into fiat before posting margin, traders can now pledge cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), or stablecoins directly to obtain USD margin and thus, be able to open and manage futures positions. This creates new ways to unlock capital, preserve crypto exposure, and deploy funds across strategies without repeatedly moving in and out of fiat.

With Kraken Futures on Kraken Pro, eligible traders in supported regions can now use both fiat and crypto-powered funding to trade perpetual and dated futures.

These instruments are offered through a secure, transparent, and regulated trading environment, giving both individual and institutional traders confidence that their activity aligns with local rules such as MiFID II in the European Union.

Collateral in futures markets acts as a good-faith deposit that ensures traders can cover potential losses. In traditional finance, this collateral is usually cash or treasury securities.In crypto derivatives, the same effect can be achieved by pledging crypto assets as security for a USD loan that funds the required margin.

When you pledge crypto as mentioned above, the value of that crypto (assuming the collateral is not a stablecoin) fluctuates with market prices. A rise in value increases your available borrowing capacity, while a fall reduces it. This creates a self-adjusting system that can work to your advantage when markets move favorably, but it can also increase risk if volatility turns against you.

Futures come in two main forms.

Dated futures

• Expiry - Fixed expiry (for example, quarterly BTC/USD contract)

• Mechanism - Settles at a defined date

• Typical use - Ideal for hedging specific time horizons or achieving price certainty

Perpetual futures

• Expiry - No expiry

• Mechanism - Uses funding rates to align contract price with spot

• Typical use - Favored for continuous exposure and short-term trading strategies

Perpetual futures have become especially popular in the crypto market because they mimic the experience of spot trading while enabling leverage and advanced risk management. Traders can hold positions indefinitely as long as margin requirements are met, adjusting their exposure dynamically.

Consider a trader who holds 1 BTC, currently valued at 100,000 USD.

They pledge this BTC to gain a USD margin loan, which is used to open a BTC/USD perpetual futures position worth 500,000 USD using 5x leverage.

• If BTC rises to 110,000 USD, both the collateral and position appreciate. The unrealized profit increases equity and margin availability.

• If BTC drops to 90,000 USD, both the collateral and the position decline in value. This reduces margin equity and may trigger a margin call or liquidation.

This example highlights the dual-edged nature of crypto. Because you utilize your crypto to borrow USD margin and trade your exposure to crypto, you gain efficiency but also take on additional directional risk. Traders need to account for this relationship when sizing positions or selecting which assets to pledge as collateral for the USD margin loan.

Using highly volatile assets as collateral for USD margin borrowing dramatically increases the risk of unexpected liquidation.

Using crypto as margin eliminates the need to convert holdings into fiat before trading. This not only saves time but also avoids potential conversion fees, spreads, and bank transfer delays. Long-term holders can remain invested in core assets while simultaneously deploying part of that value to pursue new opportunities in derivatives markets.

With crypto-collateralized futures, your existing crypto portfolio becomes an active trading resource whilst kept in regulated custody. Instead of being locked in cold storage, part of your balance can support directional or hedged positions that align with your broader market views. This allows you to react quickly to price swings and manage exposure without liquidating your main holdings.

Kraken Futures is built around transparency and compliance.

In the EU, futures trading under Kraken EU operates within the MiFID II regulatory framework, supervised by the European regulator. This ensures investor protections, segregated custody, and consistent reporting standards.

Elsewhere, Kraken Futures provides multi-collateral access to a broad range of markets while adhering to applicable local standards.

This global approach allows clients to engage with derivatives under a governance model that prioritizes market integrity and client protection.

Pros

• Greater capital efficiency without converting to fiat

• Maintains crypto exposure while trading futures

• Faster funding and withdrawals using on-chain assetS

Cons

• Collateral value fluctuates with market prices

• Higher liquidation risk during volatility

• Requires careful monitoring of margin ratios

Pros

• Stable value reduces margin volatility

• Lower risk of liquidation due to collateral stability

• Familiar structure for traditional traders

Cons

• Requires conversion from crypto, adding cost and delay

• Less capital-efficient for crypto holders

• Limited flexibility for multi-asset or cross-margin strategies

• Collateral volatility: Because crypto assets can be highly volatile, large crypto price moves can affect pledged asset value and margin requirements.. A sudden drawdown may reduce your margin ratio even if your open position has not changed, potentially leading to automatic liquidation if not managed proactively.

• Example: Imagine being long Solana (SOL), but using Ethereum (ETH) to power your USD margin. If the price of ETH were to suddenly drop (irrespective of the price of SOL), your collateral could suddenly be in jeopardy.

• Amplified gains and losses: Leverage allows you to control larger positions with less capital, but losses are magnified as well. Responsible use of leverage and rigorous risk management are essential.

• Mark prices and funding: Futures markets rely on mark prices to calculate unrealized profit and loss and to determine when liquidations occur. In perpetual futures, funding payments keep prices aligned with spot markets. Traders should track both to understand the real cost of maintaining positions. High funding rates can significantly eat into your profits over time.

• Margin mechanics: Futures accounts use initial and maintenance margin requirements. Falling below maintenance triggers liquidation. On Kraken Pro, margin monitoring tools help you manage exposure and collateral balance efficiently.

What's the difference between mark price and last price? Find out here.

To begin trading with crypto as collateral, complete account verification and accept the futures terms within your Kraken Pro dashboard. Once approved:

1. Fund your spot wallet with eligible assets such as BTC, ETH, or supported stablecoins.

2. Transfer your assets to your Futures wallet

3. Select your contract of choice, trade direction ( buy or sell) and quantity before clicking buy or sell to place your order

4. Kraken Pro will display margin requirements and estimated leverage in real time.

5. Once your order has been matched and your position is open, monitor your margin ratio through the interface or app. Alerts and liquidation thresholds help you maintain visibility on risk.

6. Adjust collateral dynamically by transferring between spot and futures wallets, or by adding stablecoins to buffer against volatility.

European clients under the MiFID II framework can access up to 10x leverage, while other regions may permit higher limits (often up to 50x) depending on local regulations.

If you hold ETH in your spot portfolio but anticipate short-term downside, you can post ETH as collateral to obtain a USD margin loan and open a short ETH/USD perpetual futures position. This allows you to offset potential losses on your holdings without selling them outright.

If you hold stablecoins such as USDT or USDC and expect BTC to rise, you can use those stablecoins as collateral for the USD margin loan to open a long BTC/USD perpetual position.

By combining multiple collateral assets for the USD margin loans, such as BTC and a stablecoin, you can diversify and reduce sensitivity to single-asset volatility. Kraken Pro’s unified margin system makes this possible within one account, improving both capital utilization and risk distribution.

For active traders, crypto collateral allows for fewer conversion steps, lower friction, and faster access to capital. For institutions, it means greater confidence that crypto derivatives can fit within regulated mandates and internal risk frameworks.

Whether you’re a seasoned veteran or someone who’s interested in opening their first futures position, Kraken Pro makes it easy to trade a wide range of crypto futures and perpetual contracts.

Sign up on Kraken and complete identity verification. Enable derivatives trading for your account.

Move funds from your Holding wallet to your Kraken Futures wallet to use as collateral for trading. Only the funds in your Futures wallet are affected by trading activity, while the funds in your Holding wallet remain unaffected. Your potential losses are limited to the amount you deposit into your Futures wallet.

Select the crypto futures market and contract you want to trade (Kraken offers monthly, quarterly and perpetual). Perpetual futures or ‘perps’ have no expiration date, allowing you to hold the position as long as you maintain your margin.

Select your desired leverage. The amount in your account multiplied by your leverage determines the total position size. Kraken calculates your maintenance margin, so you must maintain a minimum equity level to avoid liquidation.

Choose whether to go long (buy) or short (sell) and place a market or limit order. Kraken will display your estimated liquidation price based on your leverage and position size. If you are entering at the market, consider your position size relative to the order book depth to determine the potential for any slippage.

Track price movements and your unrealized profits or losses. Ensure your margin level stays above the maintenance margin to avoid margin calls or liquidation.

Consider setting stop-loss and take-profit levels may help to protect your invested capital. Be aware of funding rates on perpetual contracts, as these are periodic payments exchanged between long and short position holders.

Close your position using a ‘reduce only’ market or limit order. Your realized profit or loss is calculated as the difference between your entry price and exit price, minus fees and funding payments.

Using crypto as collateral for the USD margin loans is changing how traders manage capital and risk in digital markets.

By allowing assets like Bitcoin or Ether to power leveraged positions, traders can stay invested while gaining new flexibility and efficiency.

As regulated platforms like Kraken Pro expand access across regions, crypto-powered futures are becoming a cornerstone of a more mature and transparent trading landscape.