100 times leverage The crazy “cryptocurrency circle” brings “get rich” or “burst”?

With the dramatic shocks in the price of virtual currencies, many people’s desire to get rich overnight has turned into an “overnight position explosion” and they have lost all their money.

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The virtual currency price shock, how many people longing for “overnight riches”, turned into “overnight burst”, no return.

The “cryptocurrency circle” senior investor Liu Peng did not expect, a dinner effort, since the beginning of the year to earn more than 100,000 yuan all “wasted”. “I was hanging 5 times the contract near $39,000 and thought it was absolutely safe, but I didn’t expect it to blow up. I didn’t expect such a big drop in bitcoin!”

On May 19, bitcoin prices plunged, falling rapidly from a single high of about $43,000 to near $29,000 at one point, a maximum drop of more than 30%. Third-party platform data shows that on the 19th, the burst of funds exceeded 40 billion yuan, involving about 700,000 people.

The reason behind many investors clearing their accounts overnight is the futures contract trading in the “coin circle”. In recent years, in addition to spot trading, futures contract trading has gradually become an important derivative of virtual currency trading. These contracts are characterized by two-way trading and high leverage. On the surface, these contracts can hedge the risk, but more investors see them as a tool to “get rich overnight”. The reason is that after adding leverage, as the “currency value” rises and falls, the earnings will also change exponentially.

The reporter browsed through several trading platforms and found that contract trading is mostly treated as an equally important segment as spot trading, with trading areas opened and vigorously promoted through the introduction of promotional activities, such as participation in the contract trading of a certain currency can participate in the share.

Investors can choose to be “bearish” or “long” in contract trading, and sign a contract with the trading platform to borrow money and add leverage to speculate on coins by depositing margin. Shockingly, some platforms can reach a maximum leverage of 125 times.

However, many of the leveraged investors only see the right trend, and then the account money rises, but rarely think about the wrong choice may face huge losses. If the short term position is insufficient, it is difficult to call bitcoin and other margin, many investors will have to watch the once proud account burst.

In January of this year, investor Mr. Zhou entered the market with 500,000 yuan of capital, dreaming of embracing the “bull market” and making a big profit. Initially, along with the tide of wild speculation in the market, Mr. Zhou’s book of funds once rushed up to 3 million yuan. However, with the arrival of the May 19 plunge market, his book of funds shrunk significantly. Unwillingly he leveraged ten times to plunge, but did not expect the market depth bottoming, 3 million yuan in more than an hour all “evaporated”.

“Now look back, the whole process is like a dream.” Mr. Zhou lamented.

Virtual currency prices are highly volatile and more risky than traditional capital markets, and contract trading further amplifies the risk.

“In the big ‘casino’ where it is normal for virtual currencies to go up or down by 50% in a single day, high leverage holds extremely high risk. Because even if you win 99 times, as long as you lose 1 time, it is possible to lose all your money.” Liu Peng said.

The risk of trading virtual currencies is much more than violent price fluctuations, behind the trading hype is often accompanied by “dealer” manipulation of market prices.

“The investors’ counterparties are not only other investors, but sometimes the platform itself. Some platforms induce investors to participate in high-leverage investments on the one hand, and manipulate prices by secretly sitting in the bank.” A person from the “cryptocurrency circle” revealed.

The industry insiders said that the virtual currency trading without physical support, the price is easy to be manipulated. In particular, many “air coins” are issued with ambiguous technology, the upper limit of the issue is not determined, there are a huge number of holders, it is easy to be “dealer” price manipulation.

The company’s main business is to provide a wide range of products and services to the market. “We suspect that the trading platform is fishy in the transaction, the price is artificially manipulated.” Mr. Zhang said.

Mr. Zhang looked for the platform to defend his rights for months with no news, but there is no other way. From China’s existing judicial practice, virtual currency trading contracts are not protected by law, and the consequences and the losses caused are borne by the parties concerned.

The high leverage under the burst, many investors two hands empty of blood, virtual currency trading platform but in which a steady income.

“Whether investors lose or earn, the trading platform will charge. Although most platforms have now been cleaned up domestically, some platforms have moved overseas, targeting essentially still domestic investors, with some website pages in Chinese and customer service also in Chinese, with the clear aim of circumventing regulation.” Dong Ximiao, chief researcher of China Merchants Union Financial, said.

The relentlessness of the market does not make investors awake, “the former and then the latter” are still in large numbers.

Data from third-party platforms show that at 10:00 on May 28, the amount of burst positions exceeded 2.4 billion yuan and the number of burst positions exceeded 75,000 people in the past 24 hours, with the largest single burst occurring in a trading platform’s ethereum transactions, involving an amount of nearly 15 million yuan.

Dong Ximiao said that it is necessary to further strengthen investor education, improve the ability of ordinary investors to identify and prevent the risks of virtual currencies, and remind the public to stay away from any form of virtual currency trading speculation activities. At the same time, we should strengthen international regulatory cooperation and explore the difficulties in cracking the cross-border regulation of virtual currencies and other problems.

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