Cheap interest, expensive liquidation
Borrow rates look low until your collateral drops and you're liquidated. Interest is the visible cost; liquidation is the real one. Track it with the health factor calculator.
What borrowing actually costs
Margin borrow rates are quoted hourly on most exchanges, which makes them look tiny. Binance might show 0.002% per hour on USDT. Annualized that's 17.5%. Borrow $10,000 for a month and you pay about $146 β before your trade makes a cent.
The math: hourly rate Γ 24 Γ days Γ amount. The trap is that borrow rates float with demand. In hot markets the USDT hourly rate can triple, because everyone longs at once and stablecoin borrow dries up. Your carefully calculated carry cost doubles mid-trade.
Check the borrow cost against your expected move before entering, not after. If you're borrowing to hold a position for three weeks and paying 1.2% in interest, your trade needs to clear that hurdle plus trading fees plus spread just to break even. Most "small" margin trades lose money on the carry alone.
Borrow rates float and vary by venue β check the current hourly rate before you open the position:
FAQ
How is crypto borrow cost calculated? Interest = amount Γ APR Γ days/365 (simple), or compounded on some protocols. It's the ongoing cost of the loan β separate from, and on top of, the liquidation risk on your collateral.
What's the real risk of borrowing against crypto? The interest is usually the small part; the big risk is your collateral falling and triggering liquidation. Keep a healthy buffer and watch the position, not just the rate.