3 ms·

Getting in early on BTC, ETH, or crypto of your choice from this bull run was probably a pretty non-reproducible fluke though. Once the leverage in crypto marke

Getting in early on BTC, ETH, or crypto of your choice from this bull run was probably a pretty non-reproducible fluke though. Once the leverage in crypto markets gets cracked down on (up to 100:1 leverage is definitely contributing to the wild moves including to the upside), the return profile won't look like that any more. And with NFTs, there's just this endless sea of them. Even within one collection, most of the supply stays dormant so there's no telling who might wake up at any moment and completely flood the market.

inter_netuser 5y ago
why does 100:1 leverage contributes to upside, but isn't cancelled out by 100:1 to downside?
- TameAntelope 5y ago
  Because you can't go below zero. There's a floor to how much you can lose, and it's "everything you've put in", not "everything plus additional debt". ...typically, anyway.
  - vageli 5y ago
    > Because you can't go below zero. There's a floor to how much you can lose, and it's "everything you've put in", not "everything plus additional debt". If you're leveraged, you are borrowing money, which means you can lose more than you put in as you could lose the money you borrowed and thus would owe on the debt. Further, if you are shorting bitcoin for instance, there is no floor.
    - zenlikethat 5y ago
      You can't generally go beyond 0 though. You'll get liquidated before that due to the exchange's risk engines. If it goes beyond, that loss is passed on to the lenders.
- zenlikethat 5y ago
  Well, for starters the funding and borrow rate(s) are often positive because people just tend to be bullish. So things have to get pumped up somehow before they come crashing down, it's a much stronger tendency among the crypto faithful to be bullish than to be bearish. I also think the other commenter's insight about how gains on the short side are capped at $0 price is relevant. So while there is downside pressure from liquidation cascades on the levered positions, the main point is that volatility in general will smooth out. The juiced up all time highs we've seen so far have been driven by leverage. Maybe BTC sells off to $12K but if there was no leverage in the system I think it would take a lot longer to bring up to $69K than it did before.

inter_netuser 5y ago

why does 100:1 leverage contributes to upside, but isn't cancelled out by 100:1 to downside?

TameAntelope 5y ago
Because you can't go below zero. There's a floor to how much you can lose, and it's "everything you've put in", not "everything plus additional debt". ...typically, anyway.
- vageli 5y ago
  > Because you can't go below zero. There's a floor to how much you can lose, and it's "everything you've put in", not "everything plus additional debt". If you're leveraged, you are borrowing money, which means you can lose more than you put in as you could lose the money you borrowed and thus would owe on the debt. Further, if you are shorting bitcoin for instance, there is no floor.
  - zenlikethat 5y ago
    You can't generally go beyond 0 though. You'll get liquidated before that due to the exchange's risk engines. If it goes beyond, that loss is passed on to the lenders.
zenlikethat 5y ago
Well, for starters the funding and borrow rate(s) are often positive because people just tend to be bullish. So things have to get pumped up somehow before they come crashing down, it's a much stronger tendency among the crypto faithful to be bullish than to be bearish. I also think the other commenter's insight about how gains on the short side are capped at $0 price is relevant. So while there is downside pressure from liquidation cascades on the levered positions, the main point is that volatility in general will smooth out. The juiced up all time highs we've seen so far have been driven by leverage. Maybe BTC sells off to $12K but if there was no leverage in the system I think it would take a lot longer to bring up to $69K than it did before.