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Warning: Disadvantages of Leverage trading on Bitmex and Bitfinex

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Leverage trading has been a market strategy since old times. Let's discuss leverage trading on Bitmex and Bitfinex and the disadvantages of leverage trading

Cryptocurrency trading has been a topic for discussion and argument for a very long time. It has both a huge section of analyst support this whereas a large set of traders are always opposing it. Apart from this argument by the two sets, one can’t deny that participating in a trade including cryptocurrencies is both risky as well as beneficial. One need to research and have a knowledge of related platform before investing his/her money in this space.

In this article, we will discuss particular trading known as leverage trading on Bitmex and Bitfinex. Nextly, we will discuss the disadvantages and dark side of leverage trading on Bitmex and Bitfinex.

 

Leverage Trading on Bitmex and Bitfinex:

Leverage trading has been a market strategy since very old times. In this type of trading, if you don’t have enough value to trade, you ask some value from someone else to complete your trade. The rules and regulations of this kind of trading are very simple and are used by many of the exchanges. This is also known as margin trading.

In crypto space also, the act of borrowing extra cryptocurrency to complete the trade is known as cryptocurrency leverage trading. Some of the cryptocurrencies like Bitmex and Bitfinex support this trading.

You can borrow at some leverage x:1 i.e. the lender will provide (1/x) of total investment. Suppose, the total desired investment is $100 then leverage of 4:1 means the lender will give you $25.

 

Let us understand with an example: Suppose, John wanted to buy bitcoin for $4000 but currently, has only $2000. Since alone he can’t do the desired trade, what he can do is to borrow $2000 from someone and trade it. Here, the leverage is 2: 1. This is an example of margin trading. Now, suppose, the trade gained a profit of 25%. The total worth is now $5000. He can give the borrowed $2000 to the lender and still can make a personal profit of $1000. Isn’t it amazing? But wait, it could be a trap for you!

 

The disadvantages of leverage trading on Bitmex and Bitfinex:

Often, it is said that the grass is greener on the other side of the fence. Same applies to this trading. As we all know that the cryptocurrency industry is often fluctuating and risky too. Let us understand with the above example how margin trading on Bitmex and Bitfinex can be a trap for you.

Suppose after borrowing $2000 from someone, you completed the trade and due to some market downhill, the trade goes to a loss of 75%. Now the total value is $1000. If you had only invested your money, you still would have $1000 but in the current condition, the first responsibility would be returning the money to the lender. He/She will claim his/her full amount. So, firstly you would have to arrange $2000 for him/her and for your money, forget about that. All of your money would be lost.

So, you can see how you can lose all of your money and even go in debt if you trade using margin trading and the market doesn’t favor you. Cryptocurrency is market of risk and if you are using leverage trading on Bitmex and Bitfinex and any crisis comes, you will be in great loss. So until you have a knowledge of margin trading, never try it. They can be rewarding too but are highly risky, so it is not advisable for the new joiner to invest in it. Also, even if you are using this trading, never invest the amount that you can’t afford to lose it.

Most of the people, in order to earn money at a very fast pace, try to use this margin trading and there have been instances where people have lost all their money in case of crisis and low price down of the cryptocurrency. In any condition of the market, the lender will ask for it complete money and you are bound to return the lender the complete amount plus some interest also. So, there is a very dark side of leverage trading on Bitmex and Bitfinex.

 

We discussed how leverage trading on Bitmex and Bitfinex could be the worst decision of your life. Like any other market, margin trading can be rewarding as well as it is very risky as you may lose all of your investment in case of crisis. In the worst condition, you may lose all of your money and may have to arrange the lender’s borrowed amount to be returned from your additional savings. This article focusses on disadvantages and dark side of leverage trading on Bitmex and Bitfinex.

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4 Comments

4 Comments

  1. Pingback: Warning: Disadvantages of Leverage trading on Bitmex and Bitfinex - Satoshiuncle

  2. Pingback: Warning: Disadvantages of Leverage trading on Bitmex and Bitfinex - Coinnounce - Crypto Ventures

  3. jeffrey s.

    January 30, 2019 at 8:26 am

    why only these two exchanges?

  4. DadeMurphy

    February 25, 2019 at 5:16 am

    That might have been a valuable article if it wasn’t full of misinformation. I wonder if there is a conflict of interest?

    “In any condition of the market, the lender will ask for it complete money and you are bound to return the lender the complete amount plus some interest also.”

    ^Sorry, but that is not how margin trading on crypto trading platforms like BitMEX works. The exchange does not ask for the borrowed money back. The risk of leverage is the increased likelihood of losing your initial investment, but a trader cannot lose any more than they initially put in, regardless of leverage. If I lose 1 dollar on a 100x leverage bet (100 dollars), I still just lose 1 dollar. It is just much easier to lose that dollar than if I had not used leverage.

    Maybe do some research before writing an article next time.

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#Exchange

Japan to establish new regulations for cold wallets of crypto exchanges

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The Financial Services Agency of Japan (FSA) is going to establish new regulations in relation to the cold wallets of cryptocurrency exchanges.

As reported by Reuters, the Financial Services Agency of Japan (FSA) is going to establish new regulations in relation to the cold wallets for the storage of cryptocurrencies for cryptocurrency exchanges.

 

According to the report, the financial regulator of Japan is going to need a more strict internal supervision of the cold storage wallets (offline wallets) within the crypto exchanges.

 

The Financial Services Agency of Japan is going to mark the issues of protecting the security of the cryptocurrencies and other endangers to the country by establishing new regulations since the agency wants to uplift the fintech industry in order to encourage the economical growth.

 

Even though the cold storage wallets are in offline mode (not connected to the internet) and are considered a lot safer than the online wallets, Japan’s Financial Services Agency is considering the internal thefts within the organization itself. Currently, a lot of cryptocurrency exchanges do not have a procedure of rotating the individual responsible for the cold storage wallets.

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#Exchange

Kraken Sued for $907,000 by ex-Employee

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An ex-employee of Kraken, Jonathan Silverman has sued the crypto exchange for failing to make the payment for his work done for the company.

An ex-employee of Kraken, a major cryptocurrency exchange, Jonathan Silverman has sued the crypto exchange for failing to make the payment for his work done for the company. The lawsuit has demanded more than $900,000 from the company.

 

Kraken Sued:

According to a publication on Bloomberg, Jonathan Silverman was responsible for managing the institutional sales and trading desk of the exchange. He was posted in New York and had an agreement with Jesse Powell, the CEO of Kraken for a salary of $150,000 for his job. They also had verbal communication regarding the payment of 10% of the yearly profit of the desk to Jonathan.

Jonathan is alleging that the desk had made more than $19 million profit in 3 months during his working period in 2017 and did not receive the 10% payment as a commission as he was promised.

However, according to Christina Vee, one of the spokeswomen for Kraken mentioned that Jonathan Silverman is giving false statements and also violating his confidential agreement.

 

Did Kraken leave New York in 2015?

Jonathan Silverman also claims that Kraken had not left New York in 2015 despite the fact that the controversial Bitlicense was introduced by the State’s department of financial services back then. He said that the company has been misleading the common people and the government regulators about not operating in New York since 2015. Jonathan claims that most of the OTC (Over the counter) traders of the exchange were done in New York.

In 2015, Kraken had posted an official publication which said that the exchange is shutting down its services in New York due to the controversial BitLicense of the State that was being brought out by the financial services department.

 

The lawsuit claims that when he left the job, Jonathan Silverman had reached an agreement with the company that he would receive $907,000 as a settlement amount which was never received by him.

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#Exchange

Alert: Singapore Exchange DragonEx Hacked

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DragonEx crypto exchange based in Singapore has allegedly been hacked on 24th March 2019. The exchange told its users about the hack on telegram.

DragonEx crypto exchange based in Singapore has allegedly been hacked on 24th March 2019. The exchange told its users about the hack through an official message on their telegram channel.

 

DragonEx Hacked:

According to the announcement, the hack led to the theft of the cryptocurrencies that belong to the exchange as well as the cryptocurrencies that belong to the users. The hack was instantly identified by the DragonEx team.

 

According to the official announcement by the admin, they were able to retrieve only a portion of the total cryptocurrencies and the team is working hard to get back the other stolen cryptocurrencies as well. Also, the team has informed many judicial administrations about the cybercrime base lodged by the exchange which includes Singapore, Thailand, Hongkong, Estonia etc. The team is currently trying to assist the police in the investigation and the exchange has currently shut down its operations.

 

The admin also told the users that DragonEx is taking full responsibility for the lost assets of users. The total amount of cryptocurrencies that were compromised during the hack is however still unknown.

 

The admin also stated a warning that the exchange will never ask the users about any personal information such as password, verification code, SMS code etc and users shall be aware of such fact. The admin also provided twenty addresses to which the hacked or stolen cryptocurrencies were sent. These twenty addresses are of twenty different cryptocurrencies such as BTC, LTC, ETH, XRP etc.

 

The admin also requested other cryptocurrency exchange as well as the people in the cryptocurrency industry to help them in investigating the case and trace the cryptocurrencies.

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