There are two main risk factors in providing funding to margin traders:

  • The cryptocurrency exchange becoming insolvent (e.g. if an exchange is hacked and everyone takes a loss)
  • Failure in cryptocurrency exchange risk-limiting trading engine. This scenario is seen to be extremely unlikely and has not occurred in major cryptocurrency exchanges. You can read more about this topic here

Providing liquidity to margin funding is NOT risk-free, but in our opinion and analysis of current level of return, the gains outweigh the risks.