There is a famous saying “a fool and his money are soon parted”. One thing that bothers me about the Bitcoin space is all that all of the people catching this rising tide think they are the Warren Buffet and can’t lose. News flash: you aren’t a great trader. When every crypto goes up everyone looks like a genius. Then they get cockier and their false bravado builds pushing them to trade on margin making even more money.
Then suddenly a sharp drop in price hits a few margin players as the exchange forces them out of their position. This creates cascading margin sales as other people are then forced out.
This article on BI talks about the guys hurt in Bitcoins recent flash-crash. They trade using margin on Bitfinex and when the price tanks they get liquidated at prices they say aren’t fair. Its possible they were forced out at bad prices – but they still would have lost a lot of their holdings. Keep in mind these guys are using margin (very dangerous) on an exchange which is completely unregulated and has major rumors of shady behavior. This accident was waiting to happen.
This brings us to a well known trader saying to all those in the crypto space:
“Bulls make money, bears make money, pigs get slaughtered”