Recently, many people have only a superficial understanding of leveraged trading, so I’ll briefly explain what this thing is all about.

Suppose Bitcoin costs $50k, and you have $50k in cash to buy one. That’s an ordinary trade, nothing special. But what if you use leverage? You only put in $5,000, and I lend you the remaining $45,000. This way, you can buy that coin with ten times leverage. Sounds good, right? Because if the coin’s price rises to $55k, you only spent $5,000 of your own money but can earn $10,000, effectively doubling your profit.

The problem is, what if the price moves in the opposite direction? If it drops to $45,000, your $5,000 is gone. But I still need to get back the $45,000 I lent you. At this point, you might think, “Let’s wait, the price will surely go back up.” Sorry, I won’t gamble with you. I have the right to sell your coins directly and recover my money. If the price drops even more, say to $44,000, you not only lose your $5,000 but also owe me $1,000, which you must repay. This is what’s called a liquidation.

How to avoid liquidation? It’s simple—add another $5,000 to your account, so your assets plus cash are enough again, and I’ll be reassured.

Now, let me tell a darker story. There used to be a bunch of fake commodity exchanges in China. Unlike those scam sites that just fake data, these exchanges’ data were all real, but they still managed to wipe out investors’ funds.

Suppose you’re trading a commodity with ten times leverage, and the current price is $50k per unit. The exchange boss knows all investors’ positions, funds, and leverage ratios—this is critical information. One dark night, they team up with a few big whales, ready with ample funds, and start a massive pump.

Why choose midnight? Because most retail investors are asleep. How can you replenish positions in time if you’re asleep? The whales go all-in on the long side, pushing the price up to $55,000. At this point, short sellers with