Over the past week we have seen reports of massive Bitcoin liquidations.
For those who do not know the term “liquidation” as it applies to funding, it refers to when a trader is forced to close a geared trade because the margin of trade has been depleted.
In everyday pleb terms, it is when someone borrow money to bet on the direction of the price of Bitcoin, and they get it wrong, resulting in them losing the money they expose to trade (or more in some cases).
When it comes to trade in Bitcoin with leverage, I remember the first line from the post below:
A fool and his geared #bitcoin Will be divorced soon.
To quote one of my teachers, “up 6% today, down 100% tomorrow.” And@Aantonop
In order to quote someone else, “#Notyourkeysnotyourcoins“
Be careful out there. @Michaeljburry is right – there is a lot of hidden leverage in #bitcoin. WARNING TEMROR.
– Caitlin Long 🔑⚡ (@caitlinlong_) June 20, 2021
So lesson number one in investing in Bitcoin doesn’t do it with leverage. (Not financial advice.)
Even now that Bitcoin has about a $ 2 trillion market capital, it is still a very fleeting asset. Its price especially fluctuates in response to news. Because of this, it is much safer to just buy some bitcoin in the spot market and keep it in the long run (at least four years).
What’s more, when and if you choose to buy some Bitcoin in the spot market, consider remaining undepressed to Bitcoin instead of overpowering for it (these expressions are subjective; interpret them as you please).
When you are overexposed to Bitcoin, or if you are new to the market and you have gone all on Bitcoin, you are more likely to panic to sell if its price dancer in the short term.
How do you want to know if you are overexposed? You are likely to start losing sleep over it and/or investing emotional energy in hoping that Bitcoin’s price is moving in a certain direction (only up).
I share this based on experience. I was overexposed to Bitcoin in 2021-2022 and I often felt sick because of it. As I diminished my exposure, I felt better and was able to think more clearly.
Find an investment threshold that you are comfortable with and plan to last for a long time.
The goal of getting rich quickly with Bitcoin is almost a safe brand recipe for getting yourself rectum.
Take it slowly and follow the very wise advice of the legendary Bitcoiner Matt Odell: Become a humble, stack rate.
(The inverse of such sage councils would be: be irrational, rate at Bitcoin irresponsibly.)
Be careful out there.
This article is one Take. Opinions expressed are completely the author’s and does not necessarily reflect BTC Inc or Bitcoin magazine.