Leverage is an investment strategy in which investors use debt (borrowed capital) to increase the potential return on their investment.
The goal is to multiply the profit potential of a project. But on the other hand, this leverage strategy can also increase the risk of loss if the investment does not go well.
Leverage Function in Trading
In general, the function of leverage in trading is to increase the purchasing power of traders in the asset market so that they can get maximum profit even though their personal capital is relatively small.
The use of leverage in crypto will allow traders to get multiple profits when the price of crypto assets rises. On the other hand, traders can also lose huge amounts of money if the price of crypto assets decreases and they have to sell assets at a lower price than the purchase price.
Therefore, traders must be wise in using this strategy when trading and ensure that they have reserve funds from other investment instruments to cover possible losses from crypto asset leverage.