🔴🔴 ATTENTION TRADERS 🔴🔴
If you’re involved in futures trading, this is an important read for you.
🔴 LEVERAGE: A POTENTIAL DISASTER IN THE MARKET
I’ve reiterated numerous times, “Avoid futures and leverage if you’re new to crypto. Even with 3-4 years of experience, it’s advisable to refrain.” Let’s understand the impact of leverage on the crypto market.
🔴 UNDERSTANDING LEVERAGE
Leverage allows you to trade with borrowed funds. For example, using $500 with 10X leverage means you trade as if you had $5000. If the price drops by 10%, your position is liquidated, creating a market sell-off to recover the exchange's funds. This triggers a cascade of sell orders, pushing prices further down.
🔴 LEVERAGE ON A LARGER SCALE
Imagine 100,000 traders using 10X leverage on ETH at different levels. A 10% drop triggers massive liquidations, causing cascading sell-offs and significant price drops. This risk of cascading liquidations can lead to flash crashes, where prices drop rapidly within minutes.
🔴 RISK OF FLASH CRASHES
Excessive leverage can lead to flash crashes, where ETH or other assets can drop 15-20% within minutes due to mass liquidations. This phenomenon is similar in traditional finance with banks and hedge funds.
Stay cautious, trade wisely, and avoid excessive leverage to navigate these turbulent times effectively.
#VanEck_SOL_ETFS #ETH_ETFs_Approval_Predictions #Bitcoin❗ #altcoins #BTC☀ $BTC
