Imagine crypto trading without leverage! That’s like asking if poker can survive without chips. Technically yes, but who’d bother showing up? We’ve built this trillion-dollar circus on borrowed money, 100x dreams, and the sweet illusion that one more tick up will make us all quit our day jobs.
But after watching two monster flush events in the last six months, the October 10, 2025 crash, and the nasty February 5, 2026 hangover, I’m starting to wonder if the whole leveraged perpetual party is real or metaphorical.
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On a first boring note, leverage taps into something ancient in us: the hubris of mortals thinking we can outsmart chaos. It’s Icarus strapping on wings of wax and feathers and soaring toward the sun, because why crawl when you can fly?
Don’t get me wrong: leverage isn’t evil. It’s rocket fuel. It turned nobodies into legends (and back to nobodies faster than you can say “margin call”). But maybe, crypto could breathe easier with a little less nitro and a lot more actual ownership.
This piece isn’t a preach-fest against borrowing, but it’s a love-hate letter to the stuff that makes crypto feel alive… until it makes you broke.
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Unfolding leverage (Why do we need it?)
Why do we even bother with leverage? Simple: because spot trading feels like being sober in a party full of drunkards. Leverage lets you punch way above your weight. Got $10k? At 20x, you’re playing with $200k. This way, a 5% move becomes 100% gains on your portfolio. Who wouldn’t want that?
On a broader picture, it juices liquidity too as traders pile in, volumes explode, spreads tighten, and suddenly everyone’s got better prices. Shorts keep bulls honest, longs keep bears from getting cocky. In bull markets, it turns euphoria into escape velocity. Without it, we would still be grinding 2-3x yearly returns like boring stock nerds. Leverage is the reason crypto went from niche geek money to front-page gambling headlines. It essentially democratized moonshots.
But here’s the deeper itch: we “need” it because humans are wired for asymmetry. We crave the lottery ticket thrill—the one where tiny input yields god-like output. It’s not just greed; it’s existential. In a universe that mostly grinds us down slowly, leverage promises acceleration, a shortcut to meaning through money. Problem is, shortcuts often lead off cliffs. We need it like we need adrenaline: feels vital in the moment, but chronic doses erode the soul (and the portfolio).
Leverage 101
Let me explain leverage professionally (to anyone pretending they understand this stuff). Leverage means borrowing to bet bigger. If you have $10k in collateral, borrow 19x more and control the $200k position. Price goes your way? Profits multiply. Goes against? Losses multiply even faster. Hit liquidation price? Exchange wipes your position, keeps your collateral, and sends you a sorrowful notification.
In the world of finance and trading, perpetuals never expire—hence “perpetual.” Funding rates keep them glued to spot: longs pay shorts in bull runs, shorts pay longs when bears rule. High leverage (50x, 100x, even 200x on some sketchy spots) turns tiny wiggles into life-changing (or life-ending) swings. It’s brilliant engineering… until it’s not. One bad candle and your account’s a smoking crater.
This is pure amplification of will: you impose your thesis on the market with borrowed force. Nietzsche might call it a micro-expression of the will to power—overcoming limits through sheer audacity, if you know you know. But the market doesn’t care about your will. It’s indifferent, like nature. Over-leverage isn’t mastery; it’s hubris begging for nemesis.
The recent leverage flushes
It was October 10, 2025: the day crypto got a group colonoscopy. Over $19 billion liquidated in 24 hours, the biggest single-day bloodbath ever. Bitcoin dropped from ~$122k to $105k, altcoins got nuked nearly 50%, 1.6 million traders rekt. Trigger? U.S. President Donald Trump’s China tariff tweetstorm; but the real killer was stacked longs at insane leverage. Open interest was sky-high, funding rates screaming greed.
One dip triggered cascades: auto-deleveraging, forced leverage positions to close, more dips. About $3.21 billion vanished in one minute at peak. I witnessed it while watching a movie in the theatre and it was all BRUTAL (the movie I meant).
Then it was February 5, 2026: round two; smaller but still savage. Bitcoin cratered hard in one of the fastest single-day drops on record, -6σ move, liquidations hit $2-2.5 billion in BTC futures alone, total market flush around $2.3-3 billion that week. Longs got smoked again as risk-off vibes from equities and macro hit. Open interest collapsed 20%+, funding went deeply negative.
These weren’t mere corrections, they were existential reminders: leverage creates fragility at scale. When everyone flies too high on borrowed wings, the sun melts them all at once. It’s not bad luck; it’s physics meeting overconfidence.
Addressing the inflated numbers: Spot Vs Perpetuals Volume
Here’s the dirty secret: those eye-popping “trillions in daily volume” headlines? Mostly smoke and mirrors. In 2025, perps crushed spot—$92.9T in perps vs. way less spot. By early 2026, perps were more than 75% of DEX volumes, even as market cap tanked 40%.
But zoom in: a $1M perpetual trade at 20x leverage? The trader only puts up $50k real collateral. The “notional” $1M is on-paper fantasy, actual market impact and liquidity provided? Closer to that $50k. Multiply across billions in open interest, and the real economic footprint shrinks dramatically. Spot volume reflects actual buying/selling of coins. Perps? It’s leveraged bets on price, often recycling the same capital in loops.
This illusion is philosophical sleight-of-hand: we convince ourselves the casino is bigger, deeper, more real than it is. But strip the leverage multiplier, and crypto’s “liquidity” looks thinner, more human-scale. We’re trading shadows of money, chasing ghosts of wealth.
Fees and CEX Vs DEX leverage offerings
CEXs are the wild west casinos: 100x, 125x, even 200x on majors. They hand you the rope, pat you on the back, and collect fees while you hang yourself. User experience is slick, but the incentives scream “take more risk, we profit either way.”
DEXs like Hyperliquid? More restrained. Mid-2024 when I jumped in, HL capped at 20x, maybe 40x-50x max for BTC on some pairs. No 100x nonsense. Why? On-chain transparency forces sanity, over-leveraging risks the whole protocol. CEXs chase volume and fees; DEXs (good ones) prioritize survival. Lower max leverage pushes better risk management: tighter stops, neutral theses instead of all-in moonshots.
It’s the difference between unchecked Promethean fire (steal from the gods, burn bright) and tempered wisdom (use just enough to cook dinner without torching the house).
My (terrible) experience with leverage
I am a seasoned trader, and started trading perpetuals heavily in 2021, mostly on centralized exchanges. For months, I kept losing a significant amount of money (due to poor decisions with excessive leverage of course), and it was all at the cost of learning.
My views on leverage shifted on more of a logical side when I came across Hyperliquid in mid-2024. While the largest centralized exchanges (CEXs) were giving access to hundred-folds (up to 100X, and some even goes 200X), Hyperliquid only allowed 20X, highest 40X for BTC. Why was this logical? Because as a business, CEXs always attempts to pocket as much trading fees as possible while giving little but attention to the user side.
Meanwhile trading on HL with 20X felt like home as using lower leverage helped me become better at risk management, and being neutral in my thesis, which was all-bullish earlier.
And no this is not any kind of promotion for the perp DEX, nor yet another CEX Vs DEX comparison, it’s all about using HIGH, AMPLE, and DECENT leverage. At last, I would not say leverage is bad but I am longing for its wise-only use.
Final take: Leverage is good, until it isn’t
Leverage is like tequila: glorious in moderation, disastrous in excess. It built crypto’s speed, liquidity, and lore. Without it, we’d have slower moons, fewer Lambos, and way less drama. But after October’s $19B massacre and February’s reminder flush, I’m convinced: crypto doesn’t need 100x to thrive. It needs sane caps, real liquidity (not notional fairy dust), and traders who treat it like investing, not slots.
On the last boring note, the line between investing and gambling is razor-thin, but it’s there: investing expects positive returns over time through ownership and patience; gambling expects the house to win, thrill notwithstanding. High leverage tips us firmly into gambling territory, negative expectancy dressed as opportunity.
Can crypto live without (heavy) leverage? Yeah, and it might live longer, happier, with fewer rekt tweets. Keeping some 10-20x max feels spicy enough, but ditch the casino extremes, focus on spot, staking, actual utility.
Happy leveraging…
Also read: Strategy Posts $551M Bitcoin Yield Gain in 2026’s First Two Months
