/biz/ - Business & Finance

based boomer boss keeping everyone from moving far out into the country side where you can afford a castle for no money with the 1 day/week day

Pinned and locked pilled

Simple explanation I guess:

I short 1 btc: I tell the exchange to sell 1 btc at market price (say $2,780)

I close my short: I tell the exchange to buy again 1 btc at market price (say $6,500)

At the end the exchange still has 1 btc, plus $280 ($6,780 - $6,500). The exchange gives me $280 minus a commission.

If instead the price went up (to say $7,000) and I closed my short, the exchange would still have 1 btc but $220 less. These $220 the exchange takes from my

account, and still takes a commission on top of that. The exchange always wins.

If I opened my short with a leverage things can get worse/better. Let's say I have 2 btc on my account and I shorted 1 btc with leverage x10. That means I

tell the exchange to sell 10 btc at market price ($67,800 in total).

If the market price goes up 10%, the exchange loses $6,780. If it goes up 20%, the exchange loses $13,360. But the exchange never loses, whatever it loses I

have to pay back. So the exchange will make sure to never lose more than I have in my account, which means it will close my short before there is a risk it

loses more than I can pay back. That's liquidation. Now if the market price goes down 10%, I win $6,780, If it goes down 20%, then $13,360 both from a 1btc

with leverahe x10 position. All this minus commisssion of course.

My short is said to be squeezed when whales are purposefully driving the price up to force my short into liquidation, which causes the exchange to buy back

the BTCs it sold when I opened my short, which drives the price even more up.

>yfw you didn't fall for the coin meme