If we are really starting a major bull market, how do you maximize it and how do you not blow it?
Will we get this market, 2017 in 2025?
It’s hard to find anything quite as fun as a crypto bull market. But you can still screw one up.
The easiest way to lose it all is, of course, leverage — especially, too much leverage. Now, there is nothing wrong with leverage, but the context matters.
Imagine the classic interest rate swap. We’ll start with two banks. Bank number 1 receives payments that vary with the change in short term interest rates while the payments it owes to others are steady, long term payments. Bank number 2 has the opposite problem, it receives a stream of steady, unchanging payments but its interest costs vary from month to month.
So, the two banks do an interest rate swap. Bank 1 buys the long term, steady payment stream from Bank 2, while selling Bank 2 the short term payment stream. Let’s say they do a swap with 1 billion USD in notional value. Sounds like a big trade, but what is really changing hands? Every month, the two banks examine the difference between long term and short term payment streams and a net payment moves from one bank to the other. At a 5% interest rate, the monthly payment on $1B is a bit over $4M, and the differential changing hands is probably in the area of a few hundred thousand USD. So, can this trade handle 100x leverage? Of course it can. $10M posted to secure the payment streams on this $1B notional value trade is more than enough.
Now, let’s imagine a trader who thinks a new token, let’s call it XYZ, is going to provide a 20x return in the next year. Or the trader thinks Bitcoin is going to rally 5x in the next 6 months. What level of leverage makes sense here?
There is no exact answer. After all, the future never repeats the past precisely. If you get out your spreadsheet and model ideal leverage, you’ve just modeled what would have worked in the past. You can’t model the future because it hasn’t happened yet. And, once it happens, it’s not the future anymore. It’s tricky stuff. Your model might help, but it is not a real guide to the future. But we know we want less leverage than in our bank example above. A lot less.
There is always someone who thinks he will buy Bitcoin at $100K, with a5K in collateral on the trade, and ride it up to $500K — turning his $5K into $400K. In fact, when we look at the volume of leveraged trades on Binance, or BitMEX or any other crypto derivatives exchange, there seems to be a very large number of such people who think they could get lucky this way.
But does that happen in the real world? Do people get long and ride it this way? Not really.
We can all fall into a gambler’s trap. We place a highly leveraged trade and it doesn’t work. We lose. Or, we place the same highly leveraged trade and it does work. Great. But now we think we’re good at this trading thing, so we do it again, but bigger. And, eventually, it doesn’t work and we lose. We end up in the same place. It’s a very effective trap.

The gambler’s trap is so good, they built a whole city with it. (Actually, more than one.)
Also, don’t forget other people’s leverage. You may believe you have a low, reasonable level of leverage. Call it 10x. But what about all the other traders? Someone else may have bought at the same time and the same price as you, but with more leverage. If a large group of people are trading with a lot of leverage at the same time as you are, their liquidations can push the price down enough to become your liquidation.

How many people were liquidate just last week?
Going back to our example of buying Bitcoin with leverage, timing it perfectly, and holding on for big move. It could work, if we are incredibly lucky and extremely disciplined. Each of these attributes is rare. The two together? Just buy lottery tickets.
So, what to do. The answer is simple. Make the short term leveraged trades a completely different category than the long term trades. You want to buy your favorite token or Memecoin that you think will rally 20x? Just buy it. No leverage. No messing around. No reason to make it complicated.
Want to bet on Bitcoin going to $120K? Or dropping back to $80K? Go ahead. Maybe some leverage and/or a tight stop loss. But this should be a very different part of your account than the long term bets.
Of course, you might wonder why mess around with leverage at all. Why trade? It all comes back to discipline. The hardest part of trading and investing is managing yourself. It is very challenging not to want to sell everything when the price is high, or to panic on a pullback. You can even become paralyzed and unable to think if your position is too big.
In my decades of trading experience, I have found the best way to unlock your mind and think more clearly is to allow yourself to trade in and out with a small portion of your funds. If you get a sudden urge to sell because you think the market might experience a short, sharp drop, you can go ahead and make that bet with 10–20% of your trading account. But don’t mess up the long term.
HODL with one part of your money. Do the leveraged trades with another. That way, if we do get the big rally we all hope is coming, you will profit from it. Better to make your 5x and still be in the game, than to get knocked out of the market, thinking of how you could have and almost did make 50x, if it weren’t for that unlucky pullback that took you out of the market.