Study the Theory, or How Leverage Destroys Your Money

BTC/USD

Key zone: 87,500 - 90,000

Buy: 91,500 (on a confident breakout of the 90,000 level) ; target 93,500-95,500; StopLoss 90,500

Sell: 85,000 (on strong negative fundamentals) ; target 82,500-80,000; StopLoss 86,000

The current growth of cryptocurrencies is fueled by borrowed capital: market participants actively use leverage in an attempt to accelerate profit. But once again, the market has proven that high-leverage trading is not a strategy — it is a direct route to destroying a deposit. And the threats work in both directions.

Reminder: trading platforms offer leverage from 100:1 to 5000:1. If the market movement aligns with the position, such a trade generates extraordinary profits. But if the price moves against you, any market impulse, large order, or fundamental event will liquidate your position faster than a candle appears on the chart.

This time speculative leverage became the primary catalyst of mass sell-offs.

In October, the average daily volume of crypto liquidations reached abnormal levels. Formally, the first trigger was Trump’s tariffs against China, but the technical conditions for a correction appeared much earlier. As early as April, the market began reversing, after which exchange algorithms started closing losing positions.

Price declines destroy capital not only for retail traders but also for public companies actively investing in digital assets. For example, Michael Saylor’s Strategy shares fell 29% in a month, BitMine Immersion Technologies dropped 35%, while Bitcoin itself declined only 13%.

In addition to standard margin trades, options, futures, treasury-share schemes, and other derivatives are used actively. Coinbase launched 10:1 perpetual futures this summer, and CBOE plans to issue perpetual BTC and ETH futures with a ten-year maturity.

Crypto lending — the growth driver of 2021 — is also making a comeback: some participants provide assets, others borrow at higher interest. But these loan rates are far above banking levels. In 2022, many lenders collapsed after the market crash. Nevertheless, according to Galaxy Digital, the volume of outstanding loans in the crypto sector reached a record $74 billion by the end of September 2025.

A separate risk is insufficient liquidity depth. Major exchanges use automatic deleveraging (ADL). When too many positions incur deep losses, the exchange forcibly closes part of the profitable positions on the opposite side to stabilize the market.

A domino effect emerges: liquidations trigger new liquidations, accelerating price declines without clear fundamental reasons. This is how falling impulses with no obvious cause appear.

Conclusion: leverage no longer works as a tool to increase returns. It is a mechanism of self-destruction. In an HFT-driven market with structural liquidity gaps and market-maker dominance, leverage above 5–10x turns trading into a gambling model.

The strategy of an experienced crypto trader is not chasing quick profit but preserving positions. Minimal leverage, monitoring fundamental conditions, hedging with options, partial profit-taking, and analyzing open interest structure allow traders to survive high volatility without critical losses.

So we act wisely and avoid unnecessary risks.

Profits to y’all!