Outcome Labs Releases Comprehensive Analysis on Crypto Derivatives Liquidation Risks
Zurich, Switzerland, September 2nd, 2024
Outcome Labs, a pioneering force in the decentralized derivatives marketplace, is proud to unveil its latest groundbreaking analysis on the crypto derivatives liquidation crisis. This study, driven by the mantra “Do Not Get Rekt,” sheds light on the often-overlooked risks associated with leveraged crypto trading, aiming to arm traders with the knowledge they need to navigate these volatile waters safely.
In a surprising revelation, Outcome Labs has identified a significant gap in the existing research landscape: no prior studies have comprehensively examined the probability of getting REKT in leveraged crypto trading. Leveraged trading, often viewed as a quick path to outsized returns, comes with the lurking danger of complete capital loss—a risk that many traders underestimate. To address this, the Outcome Labs team conducted an extensive analysis of eight years of daily Bitcoin price data. The results were startling: the risk of liquidation increases exponentially as leverage or holding periods extend, even for traders who believe they have mitigated risks through short-term strategies.
“Traders using 25X leverage face a 25% chance of losing 100% of their funds within just 24 hours,” stated Pete Harrigan, Founder of Outcome Trading. This stark statistic underscores the critical need for effective risk management strategies in the crypto trading world.
Harrigan further elaborated, “Over a series of 50 trades, the probability of losing all capital surges once leverage exceeds 5x.” This is a crucial insight for both novice and seasoned traders, highlighting that the odds are often stacked against those who venture into high-leverage positions without a proper understanding of the risks involved.
One of the key findings of Outcome Labs’ research is the debunking of a prevalent myth in the trading community: the belief that shorter time frames can effectively mitigate risk. While some traders argue that quick in-and-out trades can shield them from significant losses, the reality is far more nuanced. According to the study, liquidations remain a significant threat, even over shorter holding periods. The rapid volatility in the crypto markets can wipe out positions within minutes, regardless of the duration for which they are held.
Harrigan emphasized this point by referencing data from @BXREKT, which reported approximately 270,000 liquidations over a four-year period. “The data clearly show that liquidations are not a rare event but a common outcome for many traders,” Harrigan noted, “and they often occur when traders least expect them.”
Comprehensive Insights for Traders
Outcome Labs’ analysis spans various holding periods, trading strategies, and a wide range of crypto assets. It offers traders valuable insights into avoiding catastrophic losses while navigating the complexities of leveraged trading. The study also reveals that risk increases dramatically not only with higher leverage but also with prolonged holding periods, irrespective of market conditions. These findings underscore the need for advanced risk management tools and strategies, which are critical for anyone involved in leveraged crypto trading.
For traders looking to build a sustainable trading strategy, the implications of this research are clear: understanding and managing the risks of leverage are paramount. Outcome Trading, through its advanced tools and platform, aims to provide traders with the resources they need to trade smarter, safer, and more profitably.
To dive deeper into the detailed findings, Read the full article here: Crawling from the REKage: The Odds of Bankruptcy in Leveraged Trading | by Peter Harrigan | Aug, 2024 | Outcome Trading
About Outcome Trading
OutcomeTrading.io is a leading Web3 decentralized autonomous organization (DAO) that empowers users to design and execute safe yet powerful derivatives outcomes. Committed to providing a secure and user-friendly trading environment, Outcome Trading helps traders achieve their financial goals while minimizing the risk of liquidation. By focusing on innovative solutions, such as embedded intelligence and advanced trading tools, Outcome Trading is redefining what’s possible in the world of crypto derivatives.