It has past a bit more than a month since my last Walk & Talk video and here I am again, on a walk!!! It is winter time, it's not that pleasant to go for a walk, and it is a race with daylight as nights are getting longer and longer... As you can see by the thumbnail photo, when I finished my walk, it was already night... Luckily, I recorded this video just before the sunset! It was spontaneous, and as many of you liked that post about DeFi and concentrated liquidity pools, I have decided to share a bit more about my approach to these things...
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None of this is financial advice... It's just my personal story and my approach to DeFi...
Now that we have cleared that, we can go to the meat and potatoes of the story... But, to understand my point of view, I would like to go back to the mistake that I made a few days ago... It was December, 4th... Bitcoin was trading under 100K and it was tried twice to break that level, but without success... For some reason, I got a reward of $30 on the MexC exchange, but the requirement to get it was to trade FUTURES until a certain date... As it was a gift, I had a genius idea to SHORT Bitcoin, or in simple vocabulary, to bet that it will NOT go over 100K! I opened trade with 15X leverage (HUGE! Don't do that!), and "invested" $15... As a good gambler, when the price began to move up, closer to 100K, I added another SHORT of $15... 😃 Playing leverage is like playing with fire, and if you go over 10X, you can burn fast...
Long story short, my liquidation price was at 103K and BTC hit 104.7K (that is still counting as the ATH!), which means that I lost "my" (not mine) $30! After less than 24 hours, Bitcoin had a huge dump under 91K, while my "imaginary" taking profit price was around 93K! So, if I had traded with 10X leverage, I would probably profited from this trade, but like this, I lost the "investment"...
To be honest, it didn't hurt too much as it wasn't actually my money, but "being right", but still losing sucks... I mentioned many times that I suck as a trader and that's why I don't usually trade at all... Especially NOT with leverage... I'm more for long-term investing, and feeding my adrenaline by playing with liquidity pools! Why do I think that LPs are better than leverage trading? For one simple reason, it's very hard to get "liquidated" with liquidity providing! The truth is that you can't earn some crazy amounts, but you can't lose big amounts either...
In the example that I described with my BTC trade, I got liquidated by shorting BTC, but if I was LONGING it, I would be probably liquidated too when that huge red candle happened! On the other side, if I have provided liquidity for the BTC:USD pair in the concentrated liquidity pool (leveraged LP-ing), my position would go OUT of the range for a short period of time (when the price went too much up, and after that, when it went down), but in the end, it would come back into the range! I would lose money, and I would probably earn juicy fees as volatility was huge and the trading volume too!
Find more details about the whole mindset behind it, and how it works (or not) in the video under...
Check out the short video and share your strategy for liquidity pools!
Thank you for your time,
--ph--
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