Bitcoin Forum

Bitcoin traders using up to 100-to-1 leverage are driving the wild swings in cryptocurrencies

Bitcoin’s aggressive moves are being driven by much more than the next China crackdown or Elon Musk headline.

Traders taking excessive risk in the unregulated cryptocurrency market being forced to sell when prices go down were in large part responsible for last week’s 30% drop in prices and outages for major exchanges, according to analysts. A burgeoning bitcoin lending market is also adding to the volatility.

The price of cryptocurrencies tanked last week, with bitcoin losing roughly a third of its value in a matter of hours. Bitcoin popped to nearly $40,000 on Monday but is still down about 33% from its high.

When traders use margin, they essentially borrow from their brokerage firm to take a bigger position in bitcoin. If prices go down, they have to pay the brokerage firm back in what’s known as a “margin call.” As part of that, there’s often a set price that triggers selling in order to make sure traders can pay the exchange back.

Read more https://www.cnbc.com/2021/05/25/bitcoin-crashes-driven-by-big-margin-bets-new-crypto-banking.html

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If not Elon or China can this truly be traders themselves, if this is true then we are trading using emotions!

100x leverage is a best way to suicide in crypto market. With 100x leverage, they will suicide many times in 24 hours.

1x leverage is safest but in crypto market, liquidations can call you anytime. Moreover, when you are in trading, with leverages, you will not control your emotion, and from 1x, you can go up to 10x, 20x at which you will be liquidated.

The margin calls with Bitcoin crash help to liquidate gamblers. It is a positive liquidation call to help the market moves up stronger.

Gamblers burn their money with Long and Short liquidations (https://www.viewbase.com/liquidation)

That's right, you could have even ended your sentence after "Gamblers burn their money". When you use 100x leverage you have to be aware that in 50% of the cases your stack is gone immediately. You might as well go to the casino and bet on black or red (ok, not quite).

The problem with such high leverage is simply that the bitcoin market turns way too fast. Even small recovery phases in a bear market can liquidate you very quickly, such as last week, when after the massive dump a few hours later a short recovery phase set in. Leverages originally come from trading with currency rates, which due to the very small fluctuations (0.001% per hour, for example) trading was only possible/meaningful with very high stacks. This is of course a completely different case with cryptos with fluctuations of xx% per day.

OP, no that might be wrong. The traders that are causing the large swings are the traders who might be leveraged 3 to 1 - 5 to 1. They are the majority of leveraged traders, trading in billions total.

The traders who are leveraged 100 to 1 are liquidated, or take profit, in minutes time average, plus they use only very little capital.