Some have bluntly stated that they do not want to be friends with those who borrow money for cryptocurrency trading because they are too dangerous.
Written by: 1912212.eth, Foresight News
In the cryptocurrency world, the opportunities for small investments to achieve large returns have long passed. If one missed the wealth-generating opportunities of 2017 and 2021, trying to turn a small amount of capital into a fortune is akin to dreaming. Of course, there are stories in the Twitter sphere of making millions from contracts with just tens of thousands, and there are also tales of hitting it big with a certain meme. However, those are other people's success stories, exceptional cases; most who did not make money or lost money remain silent and unnoticed. The belief that borrowing money becomes a consensus among some cryptocurrency traders who want to get rich.
Recently, the wave of account freezes at OKX has pushed the topic of borrowing money for cryptocurrency trading into public scrutiny. Reports indicate that some user accounts were frozen due to issues related to the source of funds, and OKX required users to provide detailed proof of funds, even including ten years of income records, clearly stating that they do not support funds obtained through online loans for cryptocurrency trading. This incident not only raised questions about OKX's compliance policies among users but also sparked intense debate within the cryptocurrency community about the phenomenon of 'borrowing money for cryptocurrency trading.'
Open-minded individuals: yield farming, arbitrage, buying mainstream coins in spot.
Hong Hao, Chief Economist of Foresight Group, once said, 'When your capital is too small, multiplying it several times will not have a particularly large impact on your life.' Perhaps most cryptocurrency traders with dreams of wealth share this view.
Twitter user 0x expressed complex feelings about online loans, stating, 'Last July, I borrowed 200,000 from Jiebei, mainly because the interest rate was favorable, only about 3%. Borrowing 200,000 with interest paid first and principal later over a year resulted in total interest of just over 10,000. The risk of low-leverage is worth taking.'
According to him, the final return doubled. However, he has now repaid 200,000 in loans.
Trader Crypto Monkey revealed that after the 2017 94 incident, he borrowed 180,000 from a general fund, 100,000 from an online loan, 70,000 from WeChat loans, and 20,000 from Zhaolian's good loan, totaling about 600,000 RMB to buy the dip.
After borrowing heavily, that was the most difficult time in life; it was a period of constant fluctuations, with swings of tens of thousands. The most painful part was needing to repay several tens of thousands each month. Pressure turned into anxiety, making each day feel like a year. Countless times I thought about the consequences of losing my bets in the future.
Finally, they awaited the bull market and received substantial returns.
Smart people use borrowed funds to buy the dip during the painful bear market and decline, ultimately reaping rewards during the bull market cycle. Alternatively, they use borrowed funds to participate in arbitrage activities such as yield farming or IPOs. They do not fantasize about getting rich overnight by using borrowed funds with 20x leverage, which may be an important reason for avoiding risks.
Cryptocurrency player Xiao Su (pseudonym) told Foresight News, 'As long as the cost of borrowing is slightly lower, even buying a Bitcoin spot can make some money, but it mainly depends on personal risk tolerance. I personally use borrowed funds to purchase mainstream coins and hold them without selling, planning to sell and repay when there's a market in the second half of the year. But I only borrow what I can repay; even if I lose that money, it's not the end of the world.'
Opponents: It's essentially leveraging.
There are those open to the mindset of borrowing money for cryptocurrency trading, as well as many strong opponents. Notable KOL Bitcoin even bluntly stated, 'Borrowing money to trade cryptocurrencies is essentially leveraging, and the game of leverage is designed for a very small number of people. Most people who want to change their fate end up accelerating the backlash of their fate. The notion that I can win is self-deception! True changes in fate come not from 'gambling with borrowed money,' but from time, patience, and continuous value accumulation.'
The topic of borrowing money for cryptocurrency trading is becoming more intense, and OKX's founder, Star, has explicitly stated that he does not recommend or support borrowing money for trading, questioning which platforms support or encourage users to borrow money for cryptocurrency trading.
Trader Paulwei also stated on Twitter why he does not recommend players to borrow money for cryptocurrency trading, especially contracts.
He explained that even when money is scarce, he resolutely refuses to borrow debt for trading. Because liquidation to zero means that the method he is currently using is wrong, his skills are insufficient, and he is 'unworthy' of using the amount of funds he had before liquidation. Immediately trading with more money is likely to repeat the same mistakes and fall into a deeper abyss. Only by daring to start over with a small amount of money can one achieve a spiral growth that validates both 'method - capital'. In such a highly volatile market, if the method improves, even a small amount of capital can naturally grow larger, sometimes even faster than expected; conversely, if the method does not improve enough, simply increasing the capital with external force will only unnecessarily increase tuition fees.
Earning profits from trading is not about recklessly increasing leverage. Once burdened with massive debt, it often has a significant impact on subsequent life. Some users who faced liquidation in contract trading were eager to achieve quick gains, hoping to recover everything in one last attempt, only to fail again and fall into the abyss.
Paulwei believes, 'The key to getting through a downturn is making an extremely counterintuitive decision: under conditions of lesser principal, having the courage to explore gradually with lower leverage.'
Summary
Some Web3 practitioners may have faced high thresholds for bank loans due to issues with provident funds and social security, having limited personal capital while also seeking quick profits, ultimately opting for online loans. However, the market is unpredictable, and leverage is a devil; one misstep in dancing with risk can lead to total loss. Controlling risk and not leaving the table may be the key to survival in the cryptocurrency space.