Why does the liquidation rate in the crypto derivatives market reach 99%, yet some people still crazily 'give money'? Crypto derivatives trading is known for high risks and high returns, with a liquidation rate statistically reaching 99% (refer to 2024 Binance liquidation data), yet countless people continue to jump in every day. What is the logic behind this? The answer lies in the unique game of human nature, market mechanisms, and the Web3 ecosystem.
1. The truth about the 99% liquidation rate: You are not losing to the market, but to human nature. Contract trading is essentially a zero-sum game under leveraged conditions: every profit comes from someone else's loss. The high losses of liquidated traders directly 'feed' a few winning traders. According to 2024 on-chain data, the average daily liquidation amount in the Binance derivatives market exceeds $1 billion, with over 90% of liquidations stemming from three major deadly traps for retail investors.
Anti-stop-loss: Refusing to set stop-losses, fantasizing about a market reversal, ultimately leading to forced liquidation and total loss.
All-in: Using the entire capital or extremely high leverage in an attempt to 'get rich overnight', only to be wiped out by minor market fluctuations.
Emotional Over-leveraging: Blindly chasing trades driven by FOMO (Fear of Missing Out) or FUD (Fear, Uncertainty, Doubt), amplifying losses.
Why do people still enter the market despite knowing the high liquidation rates?
FOMO psychology: In a bull market, social media (e.g., platform X) is filled with narratives of 'hundredfold coins' and 'doubling overnight'; retail investors are attracted by the 'wealth effect' and ignore risks.
Survivorship bias: The stories of wealth flaunted by a few winners (e.g., KOLs sharing results on X) overshadow the silence of 99% of liquidated traders, creating an illusion of 'getting rich'.
Low barrier, high leverage: Web3 exchanges offer 5x-100x leverage, with entry as low as a few dozen dollars, attracting many 'gambler-type' players.
2. The fatal misunderstanding of leverage: What you think is 'safe' is a lie.
The '5x' or '10x' leverage touted by exchanges is merely a risk control parameter; the real risk lies in real leverage, defined as:
Real leverage = Position value ÷ Stop-loss funds
Case study:
Starting capital of 10,000 USDT, using 10x leverage (position of 100,000 USDT), with a stop-loss set at 100 USDT.
Real leverage = 100,000 ÷ 100 = 1,000 times!
Market fluctuation of 0.1% (e.g., BTC dropping from 60,000 to 59,940) can lead to liquidation.
Data insight: According to CoinGlass statistics for 2024, 80% of liquidated accounts had real leverage exceeding 50 times, even if the nominal leverage was only 5-10 times. This indicates that retail investors generally underestimate the amplifying effect of stop-loss settings on risk.
Why do players ignore real leverage?
Cognitive bias: Newbies lack the concept of risk management and mistakenly believe that 'low leverage' equals low risk.
Platform design: Exchanges attract users through high leverage and low margin requirements, with liquidation fees becoming their main source of revenue (in 2024, liquidation fee income accounted for about 15% of total revenue for Binance).
Immediate feedback: The fast-paced nature of contract trading (minute-level settlements) makes people addicted to the 'gamble', leaving no time to reflect on risks.
3. The essence of contracts: An on-chain game of 'picking up corpses'
Q: Where does the money in contracts come from?
A: From the liquidated traders!
The derivatives market does not create value; it is a redistribution of wealth. Winners 'pick up money' from the losses of liquidated traders through precise risk management and market insights. Opportunities always exist, whether in a bull or bear market:
Bull market: Retail investors FOMO chase prices, shorting at high levels can lock in profits.
Bear market: Retail investors panic sell, buying at low levels can capture rebounds.
Data evidence: According to 2024 BitMEX liquidation data, 70% of liquidations occur during periods of severe market fluctuations (e.g., BTC fluctuating more than 5% in a day), while profitable accounts are mostly high-frequency traders or quantitative teams, capitalizing on the emotional trading of retail investors.
Why do some people still play, knowing it’s a 'corpse game'?
High return temptation: The returns of a few successful individuals (with daily ROI reaching 50%-200%) far exceed traditional investments, attracting risk-takers.
Decentralized narrative: Web3 emphasizes 'no intermediaries' and 'free games', leading players to mistakenly believe in 'fairness', ignoring the invisible advantages of market makers and platforms.
Community Buzz: KOLs on platform X create the illusion of 'getting rich by following trades' through 'sharing results' and 'calling trades', attracting retail investors to become 'on-chain fuel'.
4. The secret of winners: Risk management > Market prediction.
The fundamental difference between professional traders and retail investors lies in mindset and strategy:
Retail investors (dreamers): Chasing 'hundredfold coins', going all-in, emotional trading, with a liquidation rate of 99%.
Professional traders (risk managers): Focus on win-loss ratio (at least 3:1), small position trial trades, strict stop-losses, and remain in cash 80% of the time waiting for the 'money-picking moment'.
Core strategy:
Patience in cash: The market is in a state of fluctuation 80% of the time, patiently waiting for high-probability opportunities (such as breaking support/resistance levels).
Dynamic stop-loss: Adjust stop-loss levels based on volatility, keeping real leverage within 10 times.
Emotional isolation: Do not be swayed by the FOMO/FUD narratives from platform X; rely on on-chain data (e.g., liquidation volume, funding rates) for decision-making.
Data insight: According to 2024 OKX funding rate data, retail long positions accounted for over 70% at the bull market peak, while profitable accounts were mostly engaged in contrary operations (shorting), confirming that 'going against human nature' is key to profits.
5. How to avoid being an 'on-chain corpse'?
To survive in the derivatives market, the core principle is to avoid liquidation. Here are practical suggestions from a Web3 investment research perspective:
Learn to calculate real leverage: Stop-loss funds should be at least 5%-10% of the position value to avoid excessively high real leverage.
Small position trial trades: Individual position should not exceed 5% of account funds to diversify risk.
On-chain due diligence: Monitor liquidation data (e.g., CoinGlass), funding rates, and large on-chain transfers to gauge market sentiment.
Emotional management: Avoid chasing peaks and bottoms, don’t trust 'calls' on platform X, use quantitative indicators (e.g., RSI, Bollinger Bands) to assist decision-making.
Choose reliable platforms: Prefer centralized exchanges (CEX) with high transparency and sound risk control (e.g., Binance, OKX), or explore DeFi contracts (e.g., dYdX), but be wary of smart contract risks.
Epilogue: Contracts are a dual game of human nature and data.
The liquidation rate in the crypto derivatives market reaches as high as 99%, yet it still attracts countless players. The root cause lies in the 'high-risk, high-reward' narrative of the Web3 ecosystem, human greed and fear, as well as the platform's invisible harvesting mechanisms. The market is not lacking opportunities, but 99% of players lose to themselves—not to the market, but due to a lack of disciplined risk management.
On-chain aphorism: Contracts are not investments, but rather a 'survival game on-chain'. Do you want to avoid being someone else's 'ATM'? First, learn to survive and wait for your 'money-picking moment'. Do you think contracts are the key to wealth, or a trap of human nature? Feel free to share your trading stories!
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