The Most Dangerous Time in Crypto

Things are about to become very turbulent in the market.  There is a common perception out there that since we have reached the market all-time highs for most coins, that it would be smooth sailing from here on out.  That it would be nothing but days of profits.  Those are the types of people that are susceptible to losing everything and missing out on a chance of a lifetime.  A change to have life-changing wealth.  

I would argue that the bull run is much more dangerous to be performing any type of leverage investing than the bear market.  The reason for that is extreme volatility.  You are embarking on a journey where everything around you want to hunt or eat you.  This is the time that you have to be extremely careful and hopefully avoid using leverage.

But why do people use leverage?  It's simple; it allows people to bet or make investment calls with more money than they actually have.  You could be placing a bet with $100, but be using 100x leverage.  This means that your $100 bet would now be a $10,000 bet.  You can quickly see how very large plays can be made that can quickly affect the markets.  If you were to guess correctly with some of these high-leveraged plays, it can bring you a lot of money.  Similar to winning the lottery.  Making a lot of money with little initial investments.  But there is a reason why you can make so much money with these plays.  The reason for that is because so many others are losing everything.  When investing with leverage, there are prices that are liquidations zones.  This means depending on if you are shorting or longing, if a price hits a certain price point, all of your funds will be taken and given to the house; in this case the exchange.  If you have been paying attention to the bitcoin markets when the price is dumping.  You will have seen that sometimes the price dumps at incredible rates of speed.  More often than not, the reason for that is liquidations.  

I'm a pretty risk averse person.  I have never investing in crypto by using leverage and probably never will.  For me personally, being in the cryptocurrency market by itself is risky enough for me.  I can't imagine I would ever be able to sleep if I was using leverage.  Not only do you have to be careful about the extreme amount of volatility in the markets, but you also need to be careful about which exchanges you use.  For example in the USA; exchanges like Kraken and Binance US are known for having pretty thin books, and this means we can see some radical price movements and much different than you would see on other exchanges.

There is a phrase that has become popular in the bitcoin world and that is; "Stack sats and chill." So simple, yet incredibly important.  I often imagine how I would feel if I was one of the people that got liquidated.  Thinking back to the years of hard work, investing, writing, staking, and researching to get my portfolio to the point that it is today.  If all of that was wiped out in mere seconds; I don't know if I would ever have the heart to get back into the cryptocurrency markets.  That feeling would become even worse as this bull run continues and we see the greatest wealth transfer in our lifetimes.  It is something that would haunt me forever.

So my advice to you is to never invest more than you can afford to lose.  Yes, you should greatly take advantage of the price dips days, but you should also maintain a long-term focus.  This means dollar cost averaging, focusing on building up your passive income with staking and lending, and using spot purchasing.

During a bull run we can all begin to feel the FOMO and our heart can become detached from our brain.   The prices increase at an incredible rate and while our brain would say that we should be careful, that nothing can go up forever.  But, at the same time our heart is telling us that the prices will keep going up and that we can miss our chance to make life-changing money.   It is usually at these moments of extreme greed that the price falls out from underneath us and the price drops.  Thus the chaos of liquidations ensue. 

Always be careful out there, and just take this market day by day.  You will be so happy that you did a few years from now.

How about you? Have you ever invested into crypto using leverage? Have you been liquidated?

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As always, thank you for reading!