Recently, Bitcoin has continued its strong upward trend and has broken through $99,000, just one step away from the $100,000 mark!
However, in such a good market situation, a large number of long orders were liquidated.
The reason is that market prices fluctuate violently, and the highly free and open market of cryptocurrency has not yet been adequately regulated, and investors have extremely high leverage ratios, which can be said to have infinitely magnified the greedy nature of human nature.
The maximum leverage of Bitcoin can reach 125 times, so as long as the price rises by 0.8%, the profit can be doubled. This temptation is really hard to resist.
Of course, gains and losses come from the same source: if it drops 0.8%, the entire principal will be lost.
This game is too stimulating, leading many investors to flock to it, with the number of investors and trading volume continuously expanding.
Meanwhile, in such a completely speculative market, super high leverage and extreme volatility have led to at least hundreds of millions of dollars in liquidations every day, with both long and short positions being affected equally.
Cryptocurrencies like Bitcoin have experienced a surge since November, closely related to Trump's re-election as President of the United States at the beginning of this month.
Trump has expressed support for cryptocurrencies multiple times, believing that cryptocurrencies have great potential in resisting inflation and preserving asset value.
This policy attitude means that cryptocurrencies can still enjoy a relatively loose and friendly policy environment for the next four years, and it can even be said that they have government endorsement. This is an absolute positive for cryptocurrencies in the medium to long term.
Favorable policies promote price increases, which then attract more incremental funds into the market, enhancing liquidity and continuing to drive prices up—cryptocurrencies are currently in such a virtuous cycle.
But this does not mean that the risks of investing in cryptocurrencies can be ignored, especially the huge risks associated with high leverage and short-term market volatility.
The continuous liquidation of a large number of long positions actually shows that the leverage ratio in this market has approached or reached a limit.
When a significant area of 'inadequate supply' occurs in a period, the price of cryptocurrencies cannot withstand a crash.
