Investors tell of shattered dreams of riches Bitcoin and other virtual currencies become “meat grinder”

“Watching 30 million yuan of contracts being forced to close, I felt paralyzed on the ground.” Xu Ning told reporters.

Investors tell of shattered dreams of riches Bitcoin and other virtual currencies become "meat grinder"

The past month has been the worst month in Bitcoin’s history.

On the evening of June 5, bitcoin once again flash crashed. The price of one bitcoin plunged more than 16,000 yuan (RMB, same below) in one day to 228,000 yuan, shrinking nearly 50% from its all-time high of 410,000 yuan in April. Even if Tesla CEO Elon Musk switched his social media personal avatar back to bitcoin again, it couldn’t save the predicament.

Nearly $3.7 billion of domestic money was reeled in within a few hours, with the largest long position blowing up to $64.04 million.

But this is just the tip of the wealth busting iceberg.

“Watching 30 million yuan of contracts being forced to close, there was a feeling of paralysis on the ground.” Xu Ning told China Securities Journal.

Fantasy of overnight riches

After three years of silence and hibernation, the virtual currency led by bitcoin rose like a rainbow earlier this year, and a large number of speculators scrambled to join, and Xu Ning was one of them.

The company’s first and foremost business is to provide a wide range of products and services to the market. He fantasized about embarking on a fast road to riches, after all, surrounded by the myth of wealth creation that can easily rise tenfold or hundredfold.

“The first time I came into contact with this circle, I was convinced, but I was lost in the bull market and started to follow the teacher to buy some cheap small coins. At first it was dog coin, and after that it was involved in Shiba Inu coin and Akita dog coin …… The teacher recommended a lot of projects, and it was overwhelming. This project name is not recognized all, and then added the next project group, some WeChat group just built a day full.” In the hands of the “wealth code” of the teacher led, Xu Ning’s enthusiasm for investment was ignited.

April 16 was the most brilliant day of Xu Ning’s coin speculation career. The doggy coin is the most important part of the company’s business. The total market value once jumped to the fifth place of the total market value of virtual currency.

Xu Ning never dreamed that the millions of dog coins he bought at the beginning of the year would make him a multi-millionaire.

“When one day can earn a lifetime salary, one would think that one can definitely get rich by this.” Having made money, Xu Ning’s psychology has also undergone subtle changes.

After the frenzy, crisis abounds

The company’s main business is to provide a wide range of products and services to the market.

A day in the cryptocurrency world is a decade on earth. This year, a series of high-yield coins (i.e., virtual currencies other than bitcoin) such as dogcoin have danced on the rising tide. coinMarketCap data shows that bitcoin accounted for up to 70% of the global virtual currency market cap in September 2019, with cottage coins accounting for just over 20% of the market cap. And now, with hundreds of high-yield coins rallying across the board, Bitcoin’s market cap has fallen to less than 50%.

However, the unlimited volume and over-concentration of chips means that these high-yield coins are empty of virtual currency concepts, but in reality are nothing more than speculative tools bouncing around in the hands of various speculators.

While Xu Ning won a moment of glory, the high-yield coins Ms. Yao purchased sent her into a deep hedge of hell.

“I topped up 100,000 yuan to buy gorilla coins, thinking I could make a fortune, only to have the gorilla coins quickly flash crash after they hit the trading platform, with assets shrinking to $180 after the plunge.” OKEx data shows that from birth to near zero, the trading life cycle of gorilla coin is only 20 minutes.

Recently, high-yielding coins such as dogcoin have fluctuated dramatically, falling back to their original form and even mostly hovering on the verge of zeroing out. With users cashing out and leaving the market, a large number of speculators were trapped and harvested, leaving only the so-called decentralization gimmick and hundreds of millions of value-free tokens.

“Referring to the last round of virtual currency bull market in 2016-2017, the recent ‘cryptocurrency disaster’ means that the current round of bubble is not far from the end.” Qin Han, chief analyst of fixed income at Guotai Junan Securities Institute, suggested that the first half of a bull market tends to see bitcoin outperforming “high-yield coins,” while the second half sees the market spread to high-yield coins and significantly outperform bitcoin. “The real inflection point of the bubble often corresponds to the bitcoin price shock but not a new high, the high-yield coin dollar price is still rising, and this deviation continues for about a month, the bubble will completely come to an end.”

Leverage operation 30 million in blood

After earning a fortune from cryptocurrencies such as dogcoin, Xu Ning targeted the most recognized mainstream coins in the cryptocurrency world, such as bitcoin and ethereum. However, this time, he no longer rests on the spot, but chooses to trade contracts, “contracts can use low cost to win dozens or even hundreds of times the profit, as long as the market fluctuations can earn money.”

There are two forms of virtual currency trading: spot trading and contract trading. But contract trading has the nature of leverage, leverage generally ranging from 5 times to 125 times. With 20 times leverage, for example, only 5% margin is required to trade, but as long as there is a 5% fluctuation, there is a risk of blowing up the position. With bitcoin fluctuating up or down a few percent a day, the risk is magnified to the extreme.

10x, 20x, 50x …… In the contract game, get rich or go broke, it’s just a matter of thought. Xu Ning daily trading hundreds of thousands of yuan face unchanged, hanging orders when more than a zero will not shake hands, while in real life, he still lives in a small room with a monthly rent of more than 2,000 yuan.

The more you play, the bigger you get, Xu Ning has become numb to the zero behind the opening number, and his day’s contract flow can even reach millions of dollars.

For the risk of virtual currency contracts, industry insiders pointed out that as long as the position can be closed at any time during the term to stop profit or stop loss, but because of the virtual currency market trading time unlimited, price fluctuations, investors often do not respond in a timely manner, and sometimes encounter network anomalies and other problems, can be operated in a timely and successful few.

According to the reporter, some trading platforms, client APP will deliberately create flashbacks, lag, positions can not be displayed and other abnormalities, affecting the user’s normal orders, withdraw orders, close positions and other trading operations, resulting in the contract burst, so as to ultimately achieve the purpose of illegal appropriation of customer property.

Xu Ning said when recalling the night of the 30 million yuan contract burst: “10,000-point waterfall came too quickly, open the account only feel cardiac arrest. I regret that I couldn’t control my desire and rushed to go long as soon as I heard the coin price doubled.” Xu Ning also cautioned other investors, “Benefits and risks go hand in hand, and greed can often make people ignore the latter. Invest with your own principles, don’t touch virtual currencies, don’t add leverage, and lose money once and lose everything.”

Regulators and relevant experts have repeatedly stressed that bitcoin is fundamentally different from financial products, has no real value to back it up, has no sovereign credit or commercial credit, and that bitcoin trading is ultimately speculation. Recently, Li Bo, deputy governor of the People’s Bank of China, clearly stated, “The central bank is studying the regulatory rules for bitcoin and stablecoin.”

Centaline Securities analyst Zhou Jianhua suggests that the recent extremely high volatility of the bitcoin reflects the excessive speculation that is prevalent in this area, and the accumulation of speculative sentiment has further given rise to such illegal activities as “leveraged matching transactions” and “token issuance financing”. The accumulation of speculative sentiment has further given rise to illegal speculative and criminal behavior, such as “leveraged matching transactions” and “token issuance and financing”, increasing the risk to the financial system. At the same time, bitcoin speculation has led to a large number of “mining” behaviors, causing a huge waste of electricity resources, which is not in line with the requirements of China’s “dual carbon strategy”.

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