A trader made $ 1 million out of $ 15,000 and lost everything. How to make money on Bitcoin

By Kluma | InterestingCrypto | 12 Jul 2020

Betting on US presidential elections, trading with a hundredfold increase in risk and profit, and participation in ICOs. The most highly profitable and dangerous ways to make money on cryptocurrency

The cryptocurrency market is considered a high-risk area. By trading Bitcoin and other digital assets, you can make a fortune, although the chances of losing are much higher. The stock market provides similar opportunities, it was proved by the American trader Richard Dobats, his story was told by The New York Times .

The user traded stocks through the Robinhood app. He replenished his account with $ 15 thousand taken on credit. By making transactions with securities and options, the trader managed to increase the initial contribution by more than 6600%, his balance rose above $ 1 million.

But recently the situation has changed. In March, the stock market experienced a major drop caused by the coronavirus pandemic. The leading US stock index S&P 500 fell by more than 30%. Shares of large global companies decreased by 2, 3 or more times. This also affected Dobats. He lost all the money he earned. The loss was so great that the trader had to take another loan of $ 30 thousand secured by real estate. Now his balance does not exceed $ 7 thousand.

The story of Dobats shows that asset trading is extremely risky and can lead to a complete loss of capital, forcing you to apply for loans. But at the same time, trading provides the possibility of multiple earnings. We talk about the most risky and profitable schemes in cryptocurrency, how they work and why you should refuse them.

100x risk and 100x profit

The cryptocurrency market is famous for its high volatility. The price of coins can rise and fall by tens of percent every day. This opens up polygamy earning opportunities, but this is not enough for many traders. Therefore, they abandon the usual trade in digital assets in favor of derivatives.

Derivatives include special contracts - futures, which allow you to increase working capital tenfold with the help of margin leverage. True, risks will increase by an appropriate amount. For example, users of the BitMEX platform have the opportunity to trade with leverage up to 100x.

This mechanism works as follows. Let's say you have 1 ruble. You can buy bitcoin with a leverage of 100x on it. In this case, the exchange will give you BTC for 100 rubles, and your initial capital of 1 ruble will be taken as collateral.

On the one hand, when using a shoulder in the 100s, a 1% increase in the Bitcoin rate will double your initial contribution. On the other hand, if the price of a coin drops by 1%, your deposit will burn. The exchange will return to itself the cryptocurrency that it issued to you for management, will also take your ruble in compensation for the funds lost by you due to an unsuccessful transaction.

Huge shoulders are one of the most profitable ways to make money on cryptocurrency trading. Consider this as an example: in March, the Bitcoin rate fell to $ 3800. Let's say you bought Bitcoin for 1 ruble with a leverage of 100x. In May, the price of a coin rose above $ 10,000. Having closed your position at this level, you would have increased your initial deposit by about 160 times, turning 1 ruble into 160.

But the risks are enormous, and they are the higher, the more you take a shoulder. For example, you are lucky to buy bitcoin at the lowest price of this year at $ 3800 with a shoulder in 100x. If the price drops by 1% to $ 3,772, the platform will liquidate your position, that is, it will close it by force and take your deposit. In March, the BitMEX platform trader thus lost $ 71 million per trade. It is also important to remember that for the use of shoulders, the exchange takes an hourly commission, usually with a floating interest rate.

The ability to work with large shoulders is provided by many trading floors. The most popular are BitMEX, Binance Futures, OKEx Futures, Deribit, Bybit and others.

Trump and Biden Betting

Not all traders trade with large leverage. Some and all avoid this function. One reason for this is high risks. The other is a complex use mechanism. Because of this, tokens were invented, which already include leverage.

For example, such coins were issued by the FTX derivative platform, for example, take the 3X Long Bitcoin token (BULL). Its course depends on bitcoin. If the second one rises in price by 1%, the first - by 3%. And vice versa, BTC is getting cheaper by 1%, BULL - by 3%. In other words, to buy this coin is like buying a BTC with a leverage of 3x.

FTX has more than a hundred tokens, the rate of which depends on popular cryptocurrencies with a leverage of 0.5-3x. But there are more non-standard and risky ways to earn money on this exchange. One of them is contracts that are tied to the US presidential election. The platform has released several futures, each of which is tied to a specific candidate, for example, Donald Trump.

How it works. The futures price for each candidate is fixed in the range from 0 to $ 1. For example, at the moment, the Trump contract costs $ 0.4. If the Americans decide to keep the current president, at the same time the futures for him will be executed at a maximum price of $ 1. At the same time, quotes for contracts of all other candidates will close at a price of $ 0. And vice versa - in case of victory of another participant in the re-election race. A commission is also taken for trading these contracts.


Another, no less risky and no less profitable way to make money on cryptocurrency is ICO and IEO. This is an initial token placement procedure, which in essence is similar to an IPO - an initial offer of shares. That is, a startup carries out the sale of its cryptocurrency to users even before it hits the exchanges.

After the initial offer phase has ended, the coin proceeds to the listing procedure. It must be added to the exchange. From this moment, the user who bought the cryptocurrency in the ICO / IEO phase can exchange it for other digital assets or fiat money.

Cryptocurrency added to the exchange after the ICO can show multiple price increases in the first seconds or in a few days. Such dynamics of nature for the expected projects or in the case when the listing is carried out by well-known, respectable sites is some guarantee of confidence that the project is not fraudulent.

For example, take the Binance exchange. In January last year, she launched a platform for IEO and since then has periodically carried out initial coin placement of other projects. The first of these was the BitTorrent token (BTT). Prior to listing on the exchange, it was priced at $ 0.00012. Immediately after listing, his course soared almost 5 times.

Then growth continued, and by May the asset set a historic high of $ 0.00186. Thus, investors who bought a token during IEO and took profit at the maximum received about 1400% of the profit.

Risks ICO and IEO is not a guaranteed way to make money. And there are several reasons for this. Firstly, it’s not a fact that you will be able to take part in the token sale. For example, on the same Binance, you need to keep exchange tokens for this. They give out lottery tickets. Perhaps the coin holders are lucky and they win the right to join IEO. Perhaps no luck. But anyway, the user runs the risk of losing on the fact that the token of the trading floor will become cheaper.

Another risk - the rate of cryptocurrency placed using IEO, may fall below the level of the initial offer. This can happen immediately after adding to the exchange or over time. For example, the Fetch.AI (FET) token added to Binance in this way now costs $ 0.039. This is 55% lower than the IEO price held last spring.

Most importantly, an ICO can be a fraudulent project. For example, according to 2018 data, more than 80% of tokens that have passed the ICO procedure have not been added to exchanges or were abandoned after that. In 2020, this happens less frequently due to improved industry regulation. But it does happen. For this reason, we recommend that you participate only in ICOs or IEOs that are held by reputed, major venues or exchanges. This does not guarantee, but increases the likelihood that the project will not be organized by criminals.

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