Crypto prop trading (proprietary trading) involves trading cryptocurrencies with a firm's capital rather than using one's own funds. Traders, also known as proprietary traders, are typically funded by a prop firm that provides them with capital to trade digital assets. In return, traders share a portion of their profits with the firm while keeping a significant percentage for themselves.

Key Features of Crypto Prop Trading:

1. Capital Allocation:

   • Prop firms provide traders with access to substantial capital, which allows them to trade cryptocurrencies on larger scales than they could with personal funds.

2. Profit Sharing:

   • The profits earned from trading are shared between the trader and the firm, with the trader keeping a portion and the firm taking its agreed-upon cut, usually 10-30%.

3. Risk Management:

   • Crypto prop trading firms enforce strict risk management policies to minimize potential losses. These can include setting loss limits or drawdown rules that traders must follow.

4. Leverage:

   • Many crypto prop firms offer leverage, allowing traders to control larger positions with less capital. While this can increase potential profits, it also heightens the risk.

5. Evaluation Process:

   • Traders often go through an evaluation process where they must demonstrate their trading skills. This may involve trading on a demo account or meeting certain profit targets in a specified period.

6. Traders' Autonomy:

   • Traders often have the freedom to choose their own strategies and risk preferences, as long as they adhere to the firm’s risk management rules.

How Crypto Prop Trading Works:

1. Application and Evaluation:

   • Traders usually apply for funding and are required to pass a performance evaluation, which tests their ability to trade profitably while managing risk.

2. Funded Account:

   • After passing the evaluation, the trader is given access to a funded account with the firm's capital.

3. Trading:

   • Traders execute trades on the firm’s behalf, using the provided capital. They keep a share of any profits made, while the firm takes a portion.

4. Profit Sharing:

   • Profits are split between the trader and the firm at the end of the trading period, according to the terms set out in their agreement.

5. Risk Management:

   • If a trader hits a loss limit or other risk-related thresholds, their account may be restricted or terminated, depending on the firm’s policies