Recently, someone asked me what leverage trading is all about, so today I’ll explain this matter thoroughly.

Let’s start with the basics. You have 5,000 dollars and want to buy Bitcoin, but Bitcoin costs 50k each. Normally, you wouldn’t be able to buy it. But leverage trading changes this rule. The exchange tells you, you put up 10% of the principal, 5,000 dollars, and I’ll lend you the remaining 45k. That way, you can buy one Bitcoin, which is a tenfold leverage.

Of course, borrowed money must be repaid. Suppose Bitcoin rises to 55k, earning you a 10% profit. Sell and pay back the 45,000, your 5,000 principal doubles to 10k. Sounds good, right? But it can turn disastrous in reverse.

If Bitcoin drops to 45,000, a 10% decline. But with tenfold leverage, your 5,000 principal is wiped out immediately. Even worse, if the price continues to fall to 44k, you not only lose your entire capital but also owe the exchange 1,000 dollars. That 1,000 is debt you must repay. This forced liquidation situation is called a margin call or liquidation. Liquidation means your principal is wiped out completely, and you even owe money.

How can you avoid liquidation? There’s only one way: top up your position quickly. Deposit another 5,000 dollars into your account, so your cash plus Bitcoin’s value can cover the borrowed amount, and the exchange won’t forcibly close your position.

It sounds theoretically simple, but in reality, it’s much more complicated.

In China, there used to be many fake exchanges—not the kind that just fake data but actual platforms. These exchanges’ data were real, and trades genuinely happened, but they could still wipe out retail investors completely. How did they do it?

Very simply. The exchange knew each investor’s position, account funds, leverage ratio—these details were all in their hands. Then, they teamed up with some wealthy operators, choosing a dark, late-night hour to act. Why choose midnight? Because most retail investors are asleep, unaware of market changes, and can’t top up their positions in time.

The operators started aggressively pushing the price up, from 50k to 55k. At this point, those with full positions and no cash—shorts with tenfold leverage—got margin called and automatically liquidated. These liquidated orders, in turn, helped push the price even higher. As the price continued rising, investors with nine, eight times leverage also began to get liquidated. The operators only needed a small amount of capital to keep pushing upward, snowballing to wipe out all the short sellers.

Suppose the price is pushed to 75k, liquidating all shorts with more than five times leverage. If the operator also used tenfold leverage, going long from 50k to close at 75k, they could make a profit of four times.

Even more ruthless, the operators can reverse their strategy. After shorting, they can start aggressively going long, smashing the price from 75k back down to 50k. At this point, there are fewer traders following the trend, making it easier to push down. Then, they add more capital and repeat the process—driving the price from 50k down to 25k. This time, the retail traders with more than five times leverage who went long get liquidated again. The operators close their positions and make another profit.

All these trades are real, and the data are genuine. As long as you understand retail traders’ positions, entry prices, leverage ratios, and have enough capital, plus operate during low-activity times, you can precisely target and wipe out retail investors. Whether they go long or short, they get liquidated, while the operators profit handsomely.

Of course, these are stories about shady, underground exchanges. How could legitimate Bitcoin markets have such schemes? Bitcoin is so regulated, where are the operators? There’s no way 20% of people control 80% of the coins. Plus, Bitcoin is so secure—how could data be used to trap retail investors?

In summary, Bitcoin is good, and liquidation is just normal market fluctuation. There’s definitely no conspiracy behind it.

If you want to truly succeed in the crypto world and avoid getting “cut,” feel free to reach out. But don’t just ask me which coin I think is good—that I really can’t answer. I hope everyone can stay more clear-headed in this market.