Binance CEO; Chanpeng Zhao (CZ) made public on social media earlier today that the giant cryptocurrency exchange has executed its first margin liquidation on a BTC ($10774.0 +0.13% ) short position. As CZ confirmed this on Twitter, he also took the advantage to educate traders of all classes on a responsible behavior towards high-risk trading.
Profitable But Risky!
Margin trading is the new “gold mine” among cryptocurrency traders. While this “hot cake” conventional trading style proves profitable, the endeavor can also be regrettable. This is a condition common with inexperience and lack of discipline.
In the practice of margin trading, traders use borrowed funds from a broker to trade financial assets. The aim of this system of trading is to maximize profit. When a trader or investor trades using margin, he pays for the securities bought with a collection of his own funds and the money borrowed from a broker. In the event that the trade generates a profit, the accrued profit is claimed. The trader would be obliged to pay back his borrowed funds and with the commission of transaction in some cases. If the trade liquidates, then the trader loses according to how much was initially invested. The risk factor in this system solely depends on how much the margin involved.
Bitcoin Price Fluctuations
Bitcoin recently surged up in price. This most recent price rally saw bitcoin overcoming the $11,000 resistance level and projected it towards the $11,300 corner. A correction back to $10,600 took place rapidly after. When price fluctuates rapidly in this manner, many traders, analysts, and enthusiasts present analysis indicating the next direction in price movements. This can be very costly for margin traders.
The Ultimate Rule
CZ took to Twitter account to warn the public against indiscriminate margin trading and financial recklessness. In his words on Twitter, “Don’t bet against bitcoin, and don’t bet [against] b…”, he gave out a 2-in-1 open-ended instruction on considering a long term margin position on BTC and advising inexperienced traders on margin trading.
We had our first Margin liquidation today. Guess what, it was on a #BTC short.
Don’t bet against bitcoin, and don’t bet again b…
— CZ Binance (@cz_binance) June 24, 2019
The ending part of the tweet is particularly controversial and open-ended. That part of the comment might have been based on his platform’s native cryptocurrency, Binance Coin (BNB). This input was probably to encourage the community to support BNB too.
Binance coin ($37.48 +0.03%) recorded significant success in the past weeks. Waxing stronger by the minutes, BNB delivered a peak price of about $40. This represents a new all-time high. Binance exchange announced trading support for BNB this week and their most recently developed decentralized subsidiary exchange, Binance DEX, will most probably do the same soon.