There's something I think everyone needs to understand clearly because many people simply don't grasp how virtual currency liquidation really works.

Let's start with the basics. If you buy one Bitcoin for 50k, that's a normal transaction, nothing special. But leverage trading is different. You only need to put in 5,000, and I will cover the remaining 45,000, so you can buy this coin. Sounds good, right? But that 45,000 isn't given for free; it's borrowed, and it must be repaid.

Suppose Bitcoin rises to 55k, and you make a 10% profit. After selling, you pay me back the 45,000, and your 5,000 principal doubles, netting a 10k profit. That's the power of leverage—small capital can generate big returns. But what if the opposite happens? If Bitcoin drops to 45,000, a 10% decline, with tenfold leverage, your 5,000 is wiped out completely. Even worse, I won't let you hold out in frustration because that's my money. I have the right to sell your coins directly and recover my 45,000. If the price has already fallen to 44,000 when I sell, you not only lose everything but also owe me 1,000. This 1,000 is a debt—that's what we call liquidation.

Want to avoid liquidation? There's only one way: add more money to your account. For example, deposit another 5,000, so your total funds plus the value of your coins exceed 45,000, and I can rest assured.

Now, let me tell you a darker story. There used to be a bunch of fake domestic trading platforms, and unlike scams with fake data, these exchanges' data were all real, yet they still managed to wipe out investors completely. The method is actually quite simple.

Suppose you're trading a certain asset with tenfold leverage, and the current price is 50k per unit. The exchange knows all investors' positions, account funds, actual leverage ratios—these insider details are fully in their grasp. On a dark night, the exchange, teaming up with some powerful market makers, ready with large capital, can execute a coordinated move to clear out everyone.

Why does it have to be at midnight? Because most investors are sleeping. How can you detect the need to add margin in time if you're asleep?

In the middle of the night, the market maker aggressively goes long, pushing the price from 50k to 55,000. At this point, short sellers with full positions and tenfold leverage are on the brink of liquidation, but since they're asleep, they can't add margin, and their coins are automatically liquidated. It costs very little to push the price higher because most people are sleeping. The forced liquidations of shorts then automatically generate new buy orders, helping the market maker continue to push the price up.

As the price continues to rise, investors with some funds and leverage of eight or nine times also start to get liquidated. The market maker only needs a small amount of money to keep sweeping upward, snowballing to blow up all kinds of leveraged shorts. Suppose the price jumps from 50k to 75k; all shorts with more than five times leverage are liquidated. Where does the money go? Assuming the market maker also uses tenfold leverage, buying at 50k and closing at 75k, they can earn four times the profit.

Even more, the market maker can reverse the operation after shorting. Now, they aggressively short, dumping coins to crash the price. Since the 50k to 75k rise was driven by the market maker themselves, there aren't many follow-up traders. Short at 75k, then dump to 50k, which isn't too difficult. Then, with larger capital, they can do the same in reverse, smashing the price from 50k down to 25k. This time, those who went long with over five times leverage are all liquidated again. The market maker buys back at the lower price, completing the harvest.

All these trades are real; it just requires much larger capital than retail traders, plus access to detailed trading data of retail investors, including positions, entry prices, leverage ratios, and inactive trading windows, to execute precise strikes. Retail traders get liquidated whether they go long or short, while the market maker profits immensely.

Of course, the story above isn't about Bitcoin but about unregulated, unscrupulous domestic exchanges. After all, Bitcoin is so legitimate—where would market makers be? Who would control 80% of the chips with only 20% of people? And the risks of liquidation in virtual currencies are so transparent—there's no dark secret, just normal market conditions.

In summary, if you want to develop long-term in the crypto space, you must understand these basic principles. Don't just ask me which coin can make money—I honestly don't know. But I can tell you, leverage looks like it can amplify gains, but it also amplifies risks. Once you understand how virtual currency liquidation works, you'll be able to survive longer in this market.