Can someone literally eli5 a few things_ _ bitcoinmarkets


It essentially means that you borrow money (or BTC) to open a position, but the exchange sure as hell won’t let you start losing someone else’s money. Iqd to usd exchange rate If you’re down a couple of percent you are only losing parts of your own 1 BTC, but as soon as you’d start losing borrowed money they cut you off (liquidate your position).

You borrow 5 of my Bitcoins I’m ready to lend to you, and you proceed to sell them.

Gold usd You owe me 5 BTC, but I’m fine with getting them back later with an interest. Crude oil futures marketwatch You sold those 5 at 1000 USD a coin because you thought the price was about to fall. Python binary You were right and you buy them back at 800 USD. World markets futures You give me back my 5 BTC and you made about a thousand bucks (before fees and interest paid to me).

In case of a leveraged position, you borrow 5 grand from me, you buy 5 BTC with it at 1000, sell at 1200. Ringgit to usd converter Made a thousand dollars before fees, you give me back my 5 grand and some extra and everybody is happy.

I’d like to point it out that with traditional exchanges, where people wire in money to buy BTC or wire money out after they sell, we are playing with real USD and BTC. 1 usd to thb In order to short you have to borrow actual BTC from actual people (through the exchange) and then sell it to other people who are free to do anything with them. 1 usd in euro This obviously comes at a cost, since nobody will lend you anything without interest.

In case of “futures” exchanges, where the crazy leverage is, like the 100x you mentioned, it happens without actual borrowing. Convert rmb to usd This comes at a cost of not being able to withdraw all of your profits until the books get balanced (usually at settlement). Nis to usd Sometimes at the end it turns out that you made less than anticipated, but that’s a whole new paragraph that I can only write less ELI5-like than then ones before.

On a normal exchange there is a risk that the person lending the fiat, or BTC or other crypto never gets all of it back. Exchange rate euro usd In case there is a huge market moving event, and the bid or ask side isn’t heavy enough to absorb all the liquidations, it’s possible that the positions can only be liquidated at a bigger loss than what the trader has in their account.

Johnny opened a leveraged long at 1000 USD. Dow futures market Terrible news hits. Mxn to usd The price starts collapsing. Pound dollar exchange rate live Due to the 9-10x leverage, in theory his funds will keep his position afloat until ~900 USD, below that he is losing my money that he borrowed. Us market futures cnbc The exchange will try to close his position when the price hits around 915-930, depending on the maintenance margin requirement they have. Gbp to usd forecast Maintenance margin is just a safety buffer so that negative balances can be avoided. Exchange rate pound to dollar history Normally his position would close before he starts losing my money.

Let’s say the market simply goes down too fast with not enough bids to absorb the liquidations and his position only closes at 850 USD. Binary song Someone will have to eat that loss.

Option 3 is what your normal BTC exchange will try to do to avoid bad publicity that could come from option 2. Python xml to json Finex had at least one day like that in 2014 or 2015, if i remember correctly, and they decided to eat the losses themselves. Us stock market cnn money I guess other exchanges also went with this option before.

On (what we call) BTC futures platforms you have a 4th option. Binary to octal examples (Only applicable to crypto platforms, btw.) Nobody is lending anyone anything and there is settlement for the contracts. Binary search in c Therefore, apart from liquidating positions early, they can just choose to socialize the loss if there are outstanding margin calls left. Binary to decimal conversion method Remember, the amount of shorts and longs has to be equal.

So Johnny’s liquidation is left hanging at ~910, it is not executed with a market order. Euro stock market If the market comes back and someone buys the hanging orders it’s all good, the sum is 0. Stock market futures after hours If the market continues to go down and never comes back till settlement they’ll just pay from either an insurance fund they are collecting or take the shortfall from the profitable traders, in what we call a socialized loss.

If I went short above 1000 and made money, at settlement (end of contract or periodic “balancing of the books”) I’d see that even though I made 10 BTC, I only get to keep less than that to cover socialized losses. Funny quotes about life While it’s not a huge deal for us, in fact it’s reassuring to think you can only lose your account, and not your house, this is not normal in legacy markets and prevents the employment of sophisticated strategies. Verizon troubleshooting number In legacy markets you can be sure to make x if the market goes to y, not so in crypto futures platforms due to this.