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Leveraged Trading Blamed for Chinese Trader Suicide

A Bitcoin trader in China has allegedly taken his own life following a disastrous trading loss on a highly leveraged trading position, as reported by Chinese blockchain outlet 8btc.

The man, named as Hui Yi, apparently lost BTC 2,000 (approximately USD 16.2 million at time of writing) of investor funds when he took up a short position at 100x leverage. When the market took a swing in the opposite direction, his position was immediately liquidated.

Hui, who was said to be the CEO and co-founder of BTE.TOP, a crypto market analysis portal, passed away on 5 June 2019. His death was only revealed by an ex-partner when rumors arose that the missing funds had been embezzled from clients, although it is widely speculated that the incident could also be a staged death to avoid repercussions.

The staggering loss would only have meant 20 Bitcoins without any margin trading — still a significant sum valued at USD 182,000, but nowhere close to the astronomical sum made possible by the 100x leverage.

Leveraged trading in Bitcoin is a means to amplify profits with a small capital, and was popularized by the BitMEX platform, which allows up to 100x leverage. It can multiply profits, but traders often underestimate how quickly positions can liquidate if the market moves in an undesirable direction, particularly with high leverage.

In the case of 100x, Bitcoin need only move 1% in the direction opposite of the trade for the position to liquidate — and Bitcoin has certainly done that and more every day for the past many years.

More and more exchanges and trading platforms are now offering leveraged or margin trading. Binance itself is in the midst of margin trading trials, as is Coinbase.

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