A Chinese Bitcoin trader has allegedly committed suicide after he lost investor’s money in a highly leveraged trade position. According to 8btc, Hui Yi lost 2,000 Bitcoins after he entered a short position which was liquidated after it went in the opposite direction. The trader, who was the co-founder and CEO of cryptocurrency market analysis platform BTE.TOP, died on June 5.
At current prices, Yi lost nearly $16 million in one position. Yi had leveraged his position by 100 times and thereby magnifying his losses.
Yi’s death was revealed by an ex-partner as speculation was raised that the 2,000 Bitcoins had been embezzled from clients. Speculation has also been rife that Yi could have faked his death to avoid paying back his clients.
Why is leveraged bitcoin trading so appealing?
It is easy to fall for the leveraged trading trap. This is because the size of a position is greatly increased using ‘someone else’s money’. In other words, a broker or an exchange lends you money to trade. But while it can be highly profitable if a trade goes your way, the losses are greatly magnified if the opposite happens.
In Yi’s case, he was expecting Bitcoin’s price to fall and so allegedly entered a short position of 2,000 BTC. By employing 100x leverage, Yi was effectively trading with 200,000 Bitcoins! Consequently, Bitcoin only needed to go up 1 percent from the entry price for Yi to lose all the funds.