Leverage in Crypto: A Downturn, Many Liquidations
Trading with leverage in the cryptocurrency market amplifies gains but, equally, losses. It works like a loan: you deposit a margin, and the platform allows you to open much larger positions. The problem arises when prices move against you: losses are amplified, and if the margin is no longer sufficient to cover them, your position is liquidated, meaning it is automatically closed by the platform.
The recent downturn in the crypto market, influenced by macroeconomic factors and a 'risk-off' sentiment, has triggered a real wave of liquidations. Billions of dollars have been lost, especially on Bitcoin and Ethereum, but also on many altcoins. This occurred because traders, betting on a price increase with leveraged positions ('long'), found themselves in trouble as soon as the market began to drop rapidly. The liquidations then created a 'cascading effect', putting further pressure on prices and triggering new forced closures.
This experience has reinforced a fundamental concept: risk management is crucial. The use of leverage requires extreme caution, stop-loss orders, and a clear understanding of the inherent volatility of cryptocurrencies. For beginners, the use of leverage is not recommended. The lesson is clear: greed can lead to rapid and massive losses in such a dynamic market.
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