) and crypto futures contracts liquidations appear, causing novice investors and non-expert analysts to point to excessive leverage by retail traders as the culprit.Gamblers are undoubtedly responsible for a large portion of these risky bets, especially when the liquidation is concentrated on retail-oriented exchanges such as Bybit and Binance, but not every futures liquidation is the result of reckless leverage use.
However, unlike regular spot trading, a futures contract cannot be withdrawn from the exchange. These leveraged futures contracts are synthetic, but they also offer the possibility to short, meaning one canThese derivatives instruments have unique benefits and can improve a trader's outcomes, but traders who become overly confident seldom end up being profitable in the mid to long term.
Executing this tactic requires substantial capital and multiple accounts. It effectively leverages market mechanics to create a significant impact. Understanding market behavior is crucial for this approach.The cash and carry trade involves purchasing an asset in the spot market and simultaneously selling a futures contract on that same asset. This strategy locks in the price difference between the spot and futures prices.
Market makers and arbitrage desks exploit these differences by opening leveraged positions and hedging them by buying or selling in the spot market. They also explore differences between exchanges or between perpetual andThis strategy, called funding rate arbitrage, involves capitalizing on varying rates across markets, requiring constant monitoring and precise execution to maximize profits while managing risk effectively.