Derivatives are usually leveraged instruments, allowing traders to take bullish (long) or bearish (short) positions worth more than the amount they have deposited as a margin at the exchange. Leverage is a double-edged sword, magnifying both profits and losses. It also exposes traders to liquidations, or forced unwinding, due to margin shortfalls. Furthermore, mass liquidations often lead to exaggerated bullish or bearish moves, so the greater the use of leverage, the higher the probability of liquidations injecting volatility into the market.
Related posts
-
Crypto Market Mirrors Early June, Says Matrixport Co-Founder
In a recent commentary on X, Daniel Yan, co-founder of Matrixport and CIO at Kryptanium Capital,... -
Bitcoin (BTC) ETFs Saw Positive Inflows in June
Data from Bloomberg Intelligence shows the spot funds saw net inflows of $790 million even as... -
36% Explosion! ENS Steals The Spotlight In The Crypto Market
The ENS token (Ethereum Name Service) has recently taken center stage in the crypto community, sustaining...