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Contracts Are Borrowing: Liquidation Is Not an Accident

Spot trading means you use your money to buy coins. If the price rises, you profit; if it falls, you lose. The coins are yours.

Contract trading is completely different: you "borrow assets" to bet on price movements, and you profit from the price difference.

A contract is borrowing, leverage is a magnifier, and liquidation is debt out of control.

Contracts ≠ Owning Assets: You Are Just "Borrowing" to Bet on Price

Contracts look like buying and selling coins, but in reality, it's a short-term borrowing activity: borrow assets → place a bet → return them → arbitrage.

Let's break down two common examples:

✅ Example 1: Shorting BTC (Bearish)

Suppose BTC = 10,000 U.

You think it will fall, so:

  1. Borrow 1 BTC from the platform;
  2. Sell it immediately to get 10,000 U;
  3. BTC drops to 8,000 U;
  4. You use 8,000 U to buy back 1 BTC and return it;
  5. The remaining 2,000 U is your profit.

You never "owned" this 1 BTC. You just borrowed it to sell, then bought it back to return. You profit from the price drop.

✅ Example 2: Longing BTC (Bullish)

Again, BTC = 10,000 U, you are bullish, so:

  1. Borrow 10,000 U from the platform;
  2. Use this money to buy 1 BTC;
  3. BTC rises to 12,000 U;
  4. Sell it to get 12,000 U;
  5. Return the borrowed 10,000 U;
  6. The remaining 2,000 U is your profit.

You also never really "owned" this 1 BTC. You just borrowed money, bet on the right direction, and earned the price difference.

Leverage = Magnifier: Double the Profit, Double the Risk

The power of contracts is that they allow you to use a small amount of money to control a large position—this is leverage.

Suppose you have 1,000 U:

Using 10x Leverage:

  • The platform lends you 9,000 U, so you can trade with 10,000 U in total;
  • If BTC rises 10%, you earn 1,000 U, a 100% return;
  • But if BTC falls 10%, you lose all your capital and get liquidated.

Leverage turns a 10% move into 100% profit or loss. It magnifies opportunity, but also disaster.

Liquidation = Debt Out of Control: Forced Sell to Protect the Platform

Liquidation is not "bad luck"—it's the platform protecting its own assets.

Using the above example:

You use 1,000 U to open a 10x long and buy 10,000 U worth of BTC.

  • If BTC drops 10%, your BTC is worth 9,000 U;
  • Your capital is wiped out, and the platform determines you can't repay the loan, so it forcibly closes your position and recovers the remaining assets;
  • You lose all your capital—this is "liquidation."

The essence of liquidation: you lose your margin, the platform forcibly closes your position to recover its loan, preventing further loss.

The Platform Is Not a Casino, It's the "House": It Knows When You'll Be Liquidated

The most dangerous beginner's fantasy: "As long as I pick the right direction, I can make money."

But the platform is not an ignorant market; it's the house with all the data. It knows:

  • How much leverage you use;
  • Your liquidation price;
  • Where many users will be liquidated together.

This means:

When liquidity is low or the house wants to harvest, it can precisely hit liquidation points and trigger mass liquidations.

This is not a conspiracy theory, but a real combination of "data advantage + high-frequency algorithms + stop-loss hunting."

How Do Contracts Trap Beginners?

  1. Profit from both up and down? Too tempting.
  2. 10x, 20x leverage? Get rich quick!
  3. Friends show off profits? I want in too.

So you:

  • Don't set stop-losses;
  • Go all-in blindly;
  • Hold on stubbornly when wrong.

The result is either liquidation or being deeply trapped. You think you lack "skills," but in fact, you just don't understand the real rules: you're gambling with borrowed money, thinking you're investing.

How to Reduce Risk?

The safest advice: Beginners should avoid contracts.

But if you insist on playing, remember these basic survival rules:

  • ✅ Start with small positions, never go all-in
  • ✅ Keep leverage under 3x, ideally 1~2x
  • ✅ Always set stop-losses—stop-loss ≠ giving up, it's protecting your capital
  • ✅ Don't copy trades, don't act on impulse, don't revenge trade

Final Words

Contracts are not financial products—they are leveraged gambling.

The logic is not holding assets, but borrowing to arbitrage. If you pick the right direction, you're a short-term winner; if not, you lose everything.

Don't think liquidation is an accident—it's a built-in ending by design.

A contract is borrowing, leverage is temptation, liquidation is destiny.

You can use contracts, but you must understand them first.

Otherwise, you're not trading—you're just giving money to the platform.