According to CIO of Pantera Capital, leveraged trading can crash the market
According to Joey Krug, the CIO of Pantera Capital, leveraged trading is the biggest risk for the cryptomime market.
According to him, some people have become more likely to take risks, especially when they realize that cryptomaps are a technology with great potential to Bitcoin Bank dominate the market.
According to Krug, the result is that investors „leverage“ by believing that there will be no major devaluation, especially as institutions will take advantage of the fall to buy.
However, for the CIO of Pantera Capital, sooner or later „the cap will explode and if the bids are not there, the settlements of long leveraged positions (buy) will cause the price to fall.
According to bybt.com, the devaluation that hit the cryptomorphic market on Jan. 10 and 11 liquidated more than $3 billion in long positions. On January 12th, this number was much lower, more than $200 million in short positions and also more than $200 million in long positions settled.
Another cryptomorphic market analyst who also gave his opinion on the subject was Willy Woo, who explained the reasons for the recent devaluation.
For the cryptomotic specialist with over 10 years of experience in the market, „unlike the previous lows of the last 2 years, which occurred in super leveraged markets, this one started in spot trading, and ended up increasing because of the ‚failure‘ that happened in Coinbase“.
On twitter he explained that exchanges operating futures contracts are likely to „remove Coinbase from its index during the ‚glitch‘ to protect the situation.
What is the risk of leveraged trading and what is leveraged trading?
The great risk of trading with leverage is that although the chances of profit increase, there is also an increase in loss.
This means that you can get along very well and make bigger profits, but if trading is not favorable you may lose large sums of money.
Trading leveraged means trading with more money than you actually have. To trade this type of trade, the trader receives from the platform that is trading a type of temporary loan, which will allow the trader to trade with larger amounts of money than he actually has in his account. See the example below:
The platform offers the trader the possibility to trade at 200:1, to open a US$ 20,000 position, the trader would have to use US$ 100 from his trading account: US$ 100 x 200 = US$ 20,000.
The higher the profit possibilities, the higher the risk.