One sentence: Spend 100 bucks as if it's 10,000 bucks. If you make money, it's exhilarating; if you lose, it goes straight to zero.
 
You only have 1000U in your account, but you insist on opening a position for 1 Bitcoin? No problem, the exchange directly lends you 90,000 U, and you open with 10x leverage! If it rises 10%, you earn 1000U (your principal doubles); if it falls 10%, you get liquidated directly, and you won't even have your underwear left.
 
This is the full charm and full toxicity of leverage.

How exactly does it work?

You first pay a "deposit" → called initial margin

 

10x leverage → deposit is only 1/10 of the position

 

100x leverage → deposit is only 1/100 (exclusive for lunatics)

 

The market moves a little, and your profit/loss immediately multiplies by the leverage factor

 

Rise 5% → 10x leverage earns 50%

 

Fall 5% → 10x leverage loses 50%

 

Fall a little more → triggers forced liquidation → entire position evaporates

 

The exchange will monitor your "maintenance margin"

 

If the money is insufficient, it first sends you a margin call notice; if still insufficient, it directly sells everything at market price for you—that's the legendary liquidation.

Classic case: Let me do the math for you

Account 1000U, 10x leverage going long on BTC
 

Bitcoin rises 10% → You earn 1000U, principal doubles, feels great

 

Bitcoin falls 9% → You lose 900U, account left with 100U

 

Falls another 1% → Direct liquidation, 1000U instantly goes to zero, and the exchange still charges you fees

 
Shorting is the same: Borrow coins, sell high first, buy back low to return, the price difference is your profit. If it skyrockets, you get liquidated; if it plummets, you double your money. Thrilling, right?

Why do so many people love playing with leverage?

  • Big things with small money: 1000U can play a 100,000 U position
  • Accelerate getting rich in bull markets, bottom-fish and turn around in bear markets
  • High capital efficiency: The remaining money can still be used for arbitrage, staking, or playing DeFi

Why do so many people die on leverage?

  • Liquidation happens in a split second; wake up from a nap and it's already zero
  • The higher the leverage, the easier it is to be killed by a single pinprick
  • Margin calls come too fast to add funds; the system is harsher than your mom, directly wiping you out

How not to die too quickly?

  • Beginners don't exceed 5x, old veggies don't exceed 20x, 100x is for immortals
  • Must set stop-loss! No stop-loss is like running naked
  • Open positions in batches, maximum loss of 2-3% of principal per time
  • Play only when emotions are stable; if you can't sleep, close the leverage and go to bed first

Last words for everyone

Leverage isn't something you can't play with; it's that you can't "go all in".

 

Those who want to turn 100 bucks into 1 million, 99% end up turning it to 0 first.

 

To live long, treat leverage as a condiment, not the main course.

 

Remember:

 

In the crypto world, those who live the longest always have more say than those who earn the most.

 

You can use leverage, but don't let it use you.