Synthetic Bitcoin Is 100x More Lethal Than the Real Thing

[emma.lee1890]

Derivatives trading isn’t new, but it’s been enjoying a renaissance of late. As the cryptocurrency market has traded sideways, traders have upped the leverage and rushed to swap BTC derivatives that promise greater risk and reward. While platforms like Bitmex and Deribit have profited from the boom in synthetic assets, many traders have been left high and dry.

Also read: Hydroelectric Dam in New York Repurposed as Crypto Mining Farm

Derivatives Trading Is a Hazardous Pursuit With Little Margin for Error
Bitcoin investing is often portrayed as navigating a bumpy road, with each trough and pothole invoking a rallying cry to “Hodl” and persevere till the finish line. If the analogy is accurate, then derivatives trading is like speeding down that road on a motorbike at 160 mph. One false move – a flash crash here; a DDoS there – and it’s game over. Hit a pothole as a hodler and all you’ll lose is some USD off your portfolio. Do the same on 100x leverage and you’ll be liquidated on the spot. Trading synthetic assets, particularly on high leverage, is not for the faint-hearted. Nor is it for the inexperienced.

Synthetic Bitcoin Is 100x More Lethal Than the Real Thing
A handful of Bitmex traders have gotten very rich indeed
There are three types of synthetic options available to bitcoin traders: futures, derivatives, and margin. Some platforms, such as Bitmex, Whaleclub, and Deribit, offer all three. Traditional exchanges such as Bitfinex, Hitbtc, and Poloniex offer margin trading only, and then there’s the likes of Okcoin which offers futures and margin but no derivatives. Here’s how the three options play out:

Futures: A type of derivative contract that can include leverage of up to 100x, futures are an agreement to buy or sell an asset – in this case synthetic BTC – at a future date for a certain price.

[bhm45]

This sort of synthetic coins and forks are nothing new, they come to the market with an enormous amount of hype and later fall on their faces without even proving anything. I personally, am not interested to see what this synthetic Bitcoin is capable of as long as it's value is backed by something.