26th November 2024 > > Leverage & China.

tl;dr

The perils of leverage, even if you get the direction correct. China is likely on the verge of adding huge new buying demand.

Market Snap

Market Wrap

Be careful what you wish for – the CCC said just yesterday “A deeper albeit temporary correction to reset the perpetual futures market would be the healthy option …”

The disappointing thing is that the perpetual futures funding rate has increased overnight despite the correction, further raising the risk of a long squeeze.

Occasional Series – Customer relations specialist Rachel Reeves

Reeves, schooled in the art of refusing irate customers the opportunity to speak to anyone of import, has made the following promises to the UK electorate:

“… no further tax rises … as the public sector must live within their means …”

“(I am) never going to have to do a budget like that again.”

We shall see.

It’s a shame she didn’t properly train or work as an economist before putting herself forward as a candidate for Chancellor of the Exchequer.

Curious Cryptos’ Commentary – Leverage

That dip to below $93k liquidated a shed load of leveraged positions yesterday – upwards of half a billion dollars of collateral was sacrificed by greedy players, the majority of whom, in all likelihood, probably do not properly understand the risks they are taking.

Intriguingly, though the majority were longs, about 30% were shorts. You have to be a very bad intraday trader to lose money going short when BTC drops $2k in just over an hour, and $5k in eight. I guess very high leverage with a very tight stop would do that, for prices never move in a straight line for long.

I must admit that this issue of using leverage is getting to me. There is one chap in a group to which I constructively contribute – he is a self-confessed newbie – who is using 100x leverage on his (long) BTC position. I mean, seriously? It all goes swimmingly well, until it doesn’t. He seems to have gone a little quiet now after previously boasting about his good fortune when we were close to $100k. I can’t imagine why that might be.

I have decided that the new house style is to talk about leveraged positions being terminated, not liquidated. It’s a scarier term, and I hope it might make some people think twice before using leverage.

Curious Cryptos’ Commentary – That China ban

ZA Bank in Hong Kong has announced a retail cryptocurrency trading service for BTC and ETH, complete with fiat on-ramp.

The press release explains:

"Through the ZA Bank app, users can now seamlessly trade top cryptocurrencies in HKD and USD — all within a single platform, with no need to switch between apps or platforms”.

There is no doubt that Hong Kong is being used as a testing ground for the wider rollout of crypto services to the mainland. That will open up the market to billions of new retail customers, a raft of huge companies that will look to BTC to bolster the balance sheet, struggling pension funds desperate to cover losses from illiquid real estate assets marked at par but worth much less than that, and a cohort of billionaires itching to get involved, mostly because cryptos are the very definition of transferable wealth.

My suspicion is that this all happens rather more quickly than some might surmise.