When I first got into bitcoin, the max leverage for perpetual contracts was 125x. But now I've noticed some exchanges offering up to 500x leverage.
Back then, gold derivatives were capped at 50x on most platforms, but recently I saw they've shot up to 1000x.
With bitcoin at 500x leverage, a mere $10 price change can liquidate your position. For gold, it’s even crazier since a $5 move can do the same.
Seems like exchanges are just cranking up the leverage as more people jump in. But seriously, should we even have this kind of high leverage?
I guess it depends on your pov? If you used volatility as a basis to judge how high your leverage should go, I guess it's necessary since Bitcoin or crypto is so volatile compared to gold. From the exchange perspective, higher leverage means a higher possibility for profit, so they probably don't care what the limit is as long as the risk is acceptable. From the traders pov, it probably depends on whether they have the skill and management to control their funds or not. Higher leverage means a higher chance to make mistake and losing their funds to begin with.
At the end of the day, we need to take care of ourselves. Exchanges will entice users to "gamble" as much as possible with high leverage and other stuff like this.
If you're using MEXC, there's even higher than this. XAUT/USDT perps trading has a maximum leverage of x1000. Imagine Gold alone is very volatile. With this, one wrong position, and if you might get liquidated if you don't act quickly.
These leverages will exist because there are some traders who treat trading as some kind of gambling, and when I say gambling, I say they're going all-in with their money alongside maximum leverage. There are traders who look at trading as some kind of way to make easy money aside from gambling itself, and for them to do it, they need higher leverage hence, the x500 and even x1000. The owners of the exchange will add it because... why not. I mean they can also make money from these high leverages.
Well, the best thing that we can do is to just avoid these high leverage. I don't even go to as high as x100, and I don't have the balls to even touch x500 on Bitcoin.
1000x leverage is what motivated me to create this thread. I also mention 1000x leverage which is on the OP but let me quote it below.
Also the gold $5 price movement again your position direction causing trading asset liquidation is about 1000x leverage.
And the exchange will be using the leverage to make money from traders but the traders will gamble and continue to lose money until they realize that high leverage is bad.
Yes, you are correct that the best thing that can be done is to avoid it.
It's not necessary, but from a business perspective, the exchange would say it's necessary. They clearly have leverage usage statistics on their exchanges. If most users set the maximum leverage and frequently get liquidated, they'd add more challenging options for their "gamblers". lol
My opinion about this 500x leverage for bitcoin and 1000x leverage for gold, this is just a business tactic for the exchange because what you say that the chances of liquidation is high with such high leverage position
500x put the traders at -0.2% move to trigger liquidation for bitcoin position.
Gold at 1000x put the position -0.1 to trigger it liquidation exchange is aware of the matric and are constantly using it to get the greedy traders to give up the capital quickly.
This is pour gambling for traders that choose such high leverage for trades.
They got really high apetite for risk. 100x leverage is already risky imagine the 500x and 1000x kek. Thats probably a gambling situation for me. They can be good on trading analysis however with this leverage even an inch of movement can burn you right away. Honestly until I see this thread I didnt know theres a high leverage with this figure. So this kind of leverage is available via mexc? Not using mexc gor future trading but only Binance and some non custodial perpetual dex. It seems they are so aggresive, probably good traders can only make a good outcome om this and with large leverage funds.
Its on business perspective, and I usually say that this exchanges never have the interest of the customers at heart they only want them to lose money and they gain.
If you have been trading on this MEXC exchange you might have noticed how bad they are, if you use this leverage and open a trade and it goes in your favour probably, there is a length your profit will get to that they will forcefully close that same trade for you. If they can liquidate someone then they should leave the traders winning trade until they close it themselves.
I think this high leverages actually increases the rate at which many people see trading as gambling and not the usual trading. Its bad for newbies coming into traders
It seems that there is a connection with the way they take some of the money from the people involved in the trade because using higher leverage will make liquidation more prone to occur if it accumulates the overall capital used by each trader. But this is just my personal view because of all the involvement in trading, the use of high leverage has a big impact on the level of capital we use for trading and we often experience much bigger losses.
Exchanges can make more money by applying greater leverage because more traders experience liquidation at certain unforeseen moments. If asked whether increasing leverage is important then the answer may vary depending on each individual looking at the trade and how they can prevent further losses on the application of that leverage.
As long as there will be greedy traders, exchanges will want to tempt them. These high leverages should not normally exist, but because these exchanges benefit from your loss, they allow these high leverages to exist.
As traders, we have to control our greed level. We shouldn't increase our leverage because an exchange offers more. Sticking to a reasonable leverage that respects risk management is discipline.
Most of the crypto exchange I use 100x is maximum for Bitcoin and 50x for other coins and XAUUSDT also has 100x leverage.
The 1000x or 500x leverage didn't exist on most of the crypto exchanges but exists on most brokers, usually for forex exchanges that include other stocks/assets and crypto.
I have some broker accounts with ultralow size; it comes with 1:1000 leverage. A slight price movement trading with Bitcoin gives you fast results, and using this high leverage, you should always have an SL. It needs proper risk management to protect your capital from spikes. This is good only if you are already good at trading, but it is not recommended to use high leverage for inexperienced traders. However, this is the broker's suggestion to trade with small capital.
Does 1000x leverage already exist on well-known crypto exchanges? The maximum I can see is 125x and mostly 100x.
For the exchange it is very necessary because it will help them get money but not the traders, on the other hand, if the trade moves in the favour of the trader, they get to make as much too just like the exchange does when they loose. But I don't think it is compulsory that the trader must use it, they can decide not to trade with leverage if it is considered too high., in as much as it both profitable and detrimental to both the exchange and the traders, it also gives room for choice, so you do not have to trade with it.
Personally, the highest leverage I have used and keep using till date is 10x and I usually stay between 5x and 10x. I cant take that kind of extreme risk!! My heart cant handle it. Even 100x is already very risky, so I dont really understand why 500x should even be an option in the first place. At that level, the smallest price movement can wipe out your position instantly. It just feels like these high leverage options are more for the exchange to benefit than the trader, because most people will get liquidated quickly. Its almost like setting people up to lose faster.
An increase in leverage by exchanges leads to an increase in the number of liquidations, and this is the reason. In some EU countries, restrictions have been introduced on the amount of leverage and exchanges are forced to adhere to these rules, automatically reducing it, unlike in other regions. And for example, in the UK, the use of leverage is not available to ordinary users.
100x leverage is a bit high in risk, it probably depends on individual traders how they do it. But with that kind of leverage, I admit that I'm still a little hesitant
about that kind of leverage set-up. Maybe rich people who have an understanding of trading can gamble with it.
Although they can really get earnings quickly with that kind of leverage, in reality, traders can also be liquidated quickly,
it's okay if there are a lot of backup funds I think.
Such high leverage isnt suitable for most traders. This is only for whales who are very experienced and only want to commit a small portion of their funds. Some newbies might try it out just because its available and they dont understand the risks, but this is a bad approach.
I understand that high leverage is meant to be more capital efficient, but I will always prefer lower risk strategies. There is no easy and risk free way to get huge profits.
It could even exist for a million times but it's on the individual to put his limit or maximum on these leverages. I think it's not that extent considering the people could adjust what they need to in these trades, it's on them for the last call. I think it's fine as long as they have some TP/SL in place and they wouldn't go all in with their whole portfolio and I think exchanges could only give this to accounts that has been trading for years I guess.
It's not should or should not issue with exchanges and users but it is more related to legal issues. If governments don't have any act, laws or regulations against such crazy super high leverages and don't prohibit such leverages, exchanges are ready to do that and there are many degenerate people who are very ready to gamble with such super high leverages. Surely they will lose money by using such high leverages but exchanges only get benefit from user bets with money.
With 100x leverage, a price change opposite than position about less than 1% is enough for liquidation.
With 500x leverage, a price change opposite than your trading position like less than 0.2% is enough for liquidation.
It's clearly super risky and even degen people should avoid it.
Too risky for me, especially since we are already in a cryptocurrency market, where we all know how high volatility is in our market.
I don't see any useful case of 500x leverage, like I'm already fine with 100x max leverage in most of the exchanges. For sure some will also not agree having this high leverage be available as we are already get used to be on what we have right now.
Many years ago was very common to see many platforms advertising "binary option" with 80% of lose in case of trade was not good (at least here in Italy).
I would not see too much change nowadays from these strategies.
Why? Users that use these instruments, in such plataforms are mostly (95%) not professional operators or they can't get real advantage of trading.
Why 95%? In these "binary options" the liquidations was hitting hard ... like a bet only professionals was able to profit (imagine insiders...)
With bitcoin this leverage sound as purely gambling