On October 10, the crypto market experienced its largest liquidation event ever. $19 billion - gone in hours.
To put that in perspective:
- The COVID crash (March 2020) wiped out about $1.2 billion.
- The FTX collapse (November 2022) erased $1.6 billion.
This time? Nineteen billion.And here’s the scary part - most traders didn’t lose because they picked the wrong coin. They lost because they used leverage.
Leverage is a double-edged sword. It can turn a small move into a huge win… or turn a small mistake into a total wipeout faster than you can click “confirm order.”
Before you use leverage again, let’s break down how traders destroy themselves - and how to make sure you don’t.
Spot Trading vs. Leverage Trading (The Foundation)
To understand the danger, you first need to understand what leverage actually is.
Spot trading: You deposit $1,000 and buy Bitcoin. If Bitcoin goes up 10%, your portfolio is now $1,100 - a 10% gain.
Leverage trading: You deposit the same $1,000 but use 5x leverage. Now, you’re trading with $5,000 total.
If Bitcoin goes up 10%, your $1,000 becomes $1,500 - a 50% gain. But if Bitcoin goes down 10%, your $1,000 becomes $500. You’ve just lost half your money on a move that would only slightly hurt a spot trader.
Leverage multiplies everything — profits, losses, and emotions.
The Leverage Death Spiral
Most traders don’t blow up on their first trade. It happens slowly… until it happens all at once.
It starts with a win. A small one. Confidence grows. Ego builds. They increase their leverage. Maybe add more margin. Then, the market moves against them — just a little.
Losses pile up. Instead of stopping, they chase. They revenge trade. They double down. Every loss feels personal.
Every win feels temporary. Leverage amplifies both the emotions and the mistakes.
And that’s how traders lose their entire accounts - not from lack of skill, but from lack of discipline.
The market doesn’t care about feelings. It punishes impulses and rewards patience.
The Hidden Costs of Leverage
Even if you manage your emotions, leverage comes with hidden costs that eat away at your profits:
1. Entry and Exit Fees
Every time you open or close a trade, you pay the exchange - usually around 0.1% per side. On a $5,000 position, that’s $10 total per trade. Ten trades a month = $100 in fees.
2. Funding Fees
These are payments between long and short traders to keep futures prices aligned with spot prices.
- If funding is positive and you’re long, you’re paying every 8 hours.
- If it’s negative, you get paid. A small 0.01% fee on a $5,000 position equals $0.50 every 8 hours - around $40–50 per month.
3. Slippage
This one kills quietly. You rarely get the exact price you see on the chart. On high-liquidity coins like Bitcoin, it’s minor. But on low-cap altcoins? You can lose 1–3% on every order just from poor liquidity.
You thought you entered at $50,000 but actually paid $50,750 - that’s slippage stealing your entry.
Position Sizing - The Silent Killer
Even traders who understand leverage often die by position sizing.
Many think 2x–3x leverage is “safe.” But during the $19B liquidation, even those positions were wiped out.
A common mistake:
Someone with $10,000 goes all-in with 10x leverage because a Twitter influencer said it would “moon.” One bad trade - and they’re wiped. Smart traders risk 1–2% of their total portfolio per trade. That means if you lose, it stings - but it doesn’t end your career.
Also, think about consecutive losses. Lose 5% per trade, three times in a row, and you’re already down 15%. One more bad move, and emotion takes over. That’s when logic goes out the window and liquidation becomes inevitable.
When Leverage Makes Sense vs. When It’s Gambling
Leverage isn’t evil. It’s just a tool - one that professionals respect and amateurs abuse.
Here’s the difference:
How Pros Use Leverage
- Use low leverage (2x–3x max).
- Risk no more than 1% of total capital per trade.
- Set stop-losses and targets before entering.
- Never move stops on emotion.
- Treat trading like risk management, not gambling.
Pros use leverage to free up capital, diversify, and stay flexible - not to get rich overnight.
How Amateurs Use Leverage
- Go 10x, 20x, even 50x “just to feel something.”
- Trade emotionally and chase candles.
- Ignore stop-losses.
- Double down after losses.
- Treat leverage like a lottery ticket.
The difference isn’t the leverage itself - it’s discipline.
If you want to use leverage responsibly:
- Stick to low leverage (2x–3x).
- Calculate position size based on stop-loss distance and account size.
- Journal every trade. Review mistakes.
- Assume every trade could fail - and plan for it.
Discipline beats excitement every single time. Respect leverage, or it will destroy you.
The $19 Billion Lesson
$19 billion disappeared in a day - not because traders were unlucky, but because they ignored risk.
Leverage can build wealth for professionals, or wipe out amateurs in seconds. The choice is in your discipline.
Trade with structure. Respect your risk. Don’t chase emotion.
Because in crypto, discipline beats luck - every single time.
