Some new investors asked me what "explosion" means. I will explain it in detail.
If Bitcoin is 50,000 US dollars, and you spend 50,000 US dollars to buy one Bitcoin, this is a normal transaction.
But there is another concept, which is leveraged trading. You still buy one Bitcoin, but this time you only need to pay 10%, 5,000 US dollars, and I will pay the remaining 90% for you. This is the so-called ten-fold leveraged trading.
Of course, the 45,000 I paid for you is not given for free, but is lent to you, and you must pay me back later.
If Bitcoin rises to 55,000, it is a 10% increase. After you sell it and pay me 45,000, you will still make a net profit of 10,000. In other words, your 5,000 principal has doubled directly.
Of course, if Bitcoin falls to 45,000, you will face a problem. The remaining value is only enough to pay back the money I lent you. So although it has only fallen by 10%, under the ten-fold leverage, your own 5,000 is equivalent to losing all your money.
At this time, you say that you are sure that the price will rise again, and you don't sell it, but hold on, okay? Definitely not. You can hold on to your own money, but the money I lend you is my money. Why should I hold on to you? What will you pay me back if the price doesn't go up? So I have the right to sell the coins for you and take my 45,000 directly. Even if you sell slowly and Bitcoin falls to 44,000, not only will you lose all your money by selling Bitcoin, but you will also owe me 1,000. This 1,000 is a debt that you must pay back, which is the so-called liquidation.
If you don't want to liquidate at this time, you only have one choice, which is to cover your position. For example, if you add another 5,000 to your account, the value of your cash plus Bitcoin will exceed 45,000 again, and I will be relieved.
