Over the past week, I saw reports on a massive Bitcoin liquidation.
For those unfamiliar with the term “clearing,” which applies to finances, it refers to when traders are forced to close leveraged trades because the trade margin has dried up.
In daily PLEB terminology, someone borrows money to bet in the direction of the price of Bitcoin, gets it wrong, and loses the money they put for trade (or in some cases it That's all).
When it comes to trading Bitcoin with leverage, remember the first line in the post below.
Fool and his leverage #bitcoin We'll break up soon.
To quote one of my teachers, “August 6% today, a 100% drop tomorrow” –@antonop
To quote another,#notyourkeysnotyourcoins”
Be careful there. @michaeljburry Right – there are lots of hidden leverage #bitcoin. Warning emptor.
-Kate Lin Long June 20, 2021
So the number one lesson in investing in Bitcoin is not to do so with leverage. (Not financial advice.)
Bitcoin still has a market capitalization of around $2 trillion, but it is still a very unstable asset. Their prices fluctuate significantly, especially in response to news. For this reason, it is much safer to buy Bitcoin in the spot market and hold it in the long term (at least four years).
Furthermore, if you choose to buy Bitcoin in the spot market, consider that you remain underexposed to Bitcoin rather than overexposed (these terms are subjective. As you do (I will interpret it).
If you're too exposed to Bitcoin, or are unfamiliar with the market, or you're using Bitcoin, you're more likely to sell it if the price is tanked in the short term.
How do you know if you are overexposed? You will lose sleep and/or start investing in emotional energy through it, hoping that the price of Bitcoin will move in a certain direction.
I share this based on experience. I was overexposed to Bitcoin from 2021 to 2022, but I often felt sick because of it. Reducing my exposure made me feel better and I was able to think more clearly.
Find a threshold for investment that you feel comfortable with and plan to hold again for the long term.
Aiming to quickly acquire Rich with Bitcoin is a surefire recipe to rekt yourself.
Slowly listen to the very wise advice of legendary Bitconner Matt Odell.
(The reverse of such wise advice is: irrationally, irresponsible bets on Bitcoin.)
Be careful there.
This article is a take. The opinions expressed are entirely the authors and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
