Why do some people say that trading cryptocurrencies should avoid contracts?

Contracts are not just limited to 100x and 125x options.

It's easy to get liquidated. How big of a spike is that?

In fact, high-leverage contracts are pure gambling.

To put it simply, contracts are meant to increase your capital efficiency. The cost of perpetual contracts is funding fees, while the cost of delivery contracts is the premium. Of course, this cost can be 0 or even negative. I won't elaborate on this here.

Many people do not have their own trading system and have lower risk tolerance. They lack strict trading discipline and prefer to hold positions. Therefore, they might think that losing 30% in spot trading is not a problem, but a threefold contract could wipe them out. $BTC

This is completely wrong. Firstly, being able to tolerate a 30% loss indicates that you lack strict trading discipline and are purely gambling in the market. You might claim to be a long-term investor, but long-term investing shouldn't involve opening contracts due to the costs and added risks.

If you have strict stop-losses, being able to bear the loss from a wrong trade is your justification for opening contracts.

For example, if you have 100,000, and the current price of BTC is 100,500, you believe 100,000 is a significant support level that won't break. If it does break, you will stop-loss. You can tolerate a loss of 10,000 and are willing to risk that amount, then you could consider opening a 20x position, which keeps you within your loss limits. However, if you do not have a stop-loss, when it drops to 95,000, you are already liquidated and out of the game. #GetRichInCrypto

So, do you understand? When opening contracts, you must know what your maximum loss is and stay within your tolerance limits. #Bitcoin

Alternatively, it could be to increase capital efficiency, knowing that it's currently a bull market and all cryptocurrencies are rising, making significant pullbacks unlikely.

If you want to increase capital efficiency, it is reasonable to use leverage of no more than 3x to allocate different cryptocurrencies.