Leverage
Borrowing capital to increase the size of a position beyond what owned funds allow, amplifying both gains and losses.
Leverage allows a trader to control a larger position than their own capital by borrowing. 10× leverage means a $1,000 deposit controls a $10,000 position — a 10% favourable move doubles the capital, but a 10% adverse move wipes it out (ignoring fees).
Crypto leverage is available via perpetual futures on CEXs (up to 100× on some platforms), margin trading, and DeFi lending protocols. Each mechanism has different liquidation mechanics and risk profiles.
High leverage is frequently cited as the primary driver of crypto's violent drawdowns: as prices fall, leveraged positions are liquidated, increasing sell pressure, which triggers more liquidations in a cascade.