Steemit Crypto Academy Contest / S13W6 - Leverage in cryptocurrencies.

Assalam-o-Alaikum!

Hello Steemians! Well come to my post. I hope that you will be doing well. I'm also fine and enjoying my life. Today I'm here to participate in this Steemit Engagement Challenge Season 13 Week 6 in the Steemit Crypto Academy. The topic of this challenge is about "Leverage in Cryptocurrencies". So get started;

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In your own words, what do you understand by leverage?

Leverage is derived from English world which means burrowed capital. It means to get something borrow for fulfill our need. There are many examples of leverage in our daily life. For example if I want to buy something but I have low balance and price of that thing is high than I will get some money from bank as lone and will fulfill my need. This term is known as leverage.

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In cryptocurency, this term leverage also used. For example if a person want to get strong in a specific crypto coin as Bitcoin and for that he needs 100$ but he has only 70$ in his wallet. Than he will borrow remaining balance from another one. This is known as leverage in cryptocurency.

Explain how leverage works?

Leverage works on the principle of borrowing capital to others to amplify our funds. For understand this term we asume an example of 10x, 20x. By applying leverage there is very good chance to get high profit but there is also many risks in it. Leverage can boost or hinder our funds. If there are 10 times more gain than there will also 10 times loss in it. Leverage enables us to take long time control on our account in cryptocurrncy.

Why is leverage used in Cryptocurrencies?

Leverage is used for making our account stronger in trading. Leverage give support to is financially to gain more benefits from our trading. If market goes to our side than there will be very profit by applying leverage. It will prove as turning point if market goes as we asume. But there are more chances of loss when we apply leverage if .market goes against us.

There should be complete knowledge about market before doing any trade. Because the market of cryptocurrncy is very volatile. So we should be very careful in leverage. It's true that leverage is shown very shinning star but not all times.

If you want to open a long position and you have 12,000 USDT in Steem and a leverage of 10x. Explain if the price of Steem rises by 45% and then explain if the price drops by 15%. Give your own opinion.

● Condition 1:

Total Steem in USDT = 12000$
Leverage = 10X
Total Amount = 10 × 12000, Will be = 120000$
Margin = 12000
If the price of steem Increase by 45%;

Than = 45% × 120000$

Profit will be = 45/100 × 120000

Profit = 54000$

● Condition 2 ;

If the price drops by 15%;

It will be = 15% × 120000

= 15/100 × 120000

The loss will be = 18000$

In both these conditions the profit is 54000$ and loss is 18000$. So total profit after subtracting loss from gain is 36000$.

Mention the advantages and Disadvantages of leverage

Leverage has both advantages and disadvantages, first I will talk about its advantages:

Advantages:

● Leverage provides us very good opportunity for making rapid increase in our funds. This means we can earn crypto at a very high rate by low balance. By applying leverage we can become millionaire in a very short time. This totally depends upon our luck, experience and analysis.

● Leverage can increase our returns this means when our trade is in our favour than our assets will increased by multiple times. And this can be done by low balance only with leverage.

Disadvantages:

● leverage proves as fatal for us in terms of our funds. This is its disadvantage because leverage is not good when we are going against the trend and are liquidated.

● Leverage increases our loss in case of wrong trade and we will loss all all our funds. Leverage is the worst thing which destructs our assets jus in a one trade and we can't do do anything. So we will be very careful.

Conclusion

So friends this is all about my today post. We have concluded from this that there are bothe benefits and loss in leverage. So we will be very careful before doing any trade in cryptocurency. Please remembered me in your prayers. Stay blessed friends.

At the end I invite @pelon53, @kouna01, @@@inspiracion, @yancar, @enamul17 and @goodybest for participating in this engagement challenge.

Thanks for reading my blog.

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Written by: @moazzamushtaq