Leverage is a disaster in the markets

I think I've said this many times: don't use leverage, don't try futures, you'll only lose your money. I can guarantee that. But that's not what I want to talk about this time. I want to talk about the impact of leverage on movements in the crypto markets. Pay attention as this is crucial to understand.

First of all, understand how leverage works: imagine you open a buy trade with US$ 100 with 10x leverage, it will act as if you have US$ 1,000. How does this work? The exchange (like Binance) will simply lend you US$ 900 and in return for that, if the price drops 10% (so that your US$ 1,000 turns into US$ 900), your position will be automatically closed to prevent you from being in debt to the exchange. You are what is called "liquidated". When you are liquidated on a long position, at the time of your liquidation, this instantly creates a market sell: this means that your remaining US$ 900 will be sold so that Binance can get its money back .Now, let's take this phenomenon and apply it on a much larger scale: imagine that 10,000 people enter long positions with 10x leverage in BTC at 3 different levels: at US$ 65 thousand, US$ 67.5 thousand and US$ 70 thousand. Now, imagine that the price drops to US$ 63 thousand, that is, -10% of US$ 70 thousand. The people who entered will be liquidated and thus trigger massive sell-offs in the market, which will strongly push down the price of BTC, which will fall to US$ 60,750 due to massive liquidations, which will trigger the liquidations of those who entered at US$ 67.5 . k, and so on... This is called cascading liquidations. When many people enter the market with leverage, there is a risk of very strong and rapid liquidations, which can create “flash crashes”, that is, moments lasting a few minutes where BTC can lose -20 or -25%. This is also the same in traditional finance, on the scale of banks/hedge funds, etc.,