Leverage is like a knife. It’s handy when cutting fruit, but if you cut your finger, it’s over.

Recently, my backend has been flooded with questions about perpetual contract leverage. From bull markets to bear markets, I’ve explained this countless times over the past five years, but beginners still fall into the trap, and even some experienced traders stumble. Yesterday, a crypto friend complained to me—"I opened a 30x long on BTC, and the market dropped 1% overnight, and I got liquidated." That’s when he finally understood that leverage isn’t about courage; it’s a math problem that must be calculated correctly.

Perpetual contracts are essentially a zero-sum game. Those who miscalculate their liquidation points will ultimately become market’s chips. Looking at exchanges offering up to 100x, 125x leverage options, it’s really like roulette in a casino—exciting, but the cost could be deadly.

**01 Most People’s Understanding of Leverage Is Off**

Why is perpetual contract leverage so attractive? Because it allows you to control a huge position with just a small margin. For example, Bitcoin is now quoted at 116,000 USD. If you open 100x leverage, you only need 116 USD to open a contract. It sounds like a shortcut to "small money, big gains."

But here’s the problem—leverage’s true nature is borrowing money, not something that appears out of thin air. Every time you increase leverage by one, it’s like borrowing an extra amount from the bank. The risk rises proportionally. The leverage multiplier determines how fast you get liquidated, but it doesn’t change the fact that you might get liquidated in the end.

Many traders obsess over 30x, 50x, even 100x leverage, dreaming of "getting rich quick with little capital." But they never seriously ask themselves: How much can I afford to lose? Do I have a stop-loss? Is it isolated or cross margin? Is my position size reasonable?

**02 The Real Risks Behind the Numbers**

These questions are not just fussing. Opening a 30x long position means a 3.3% drop in price triggers liquidation. If it’s 100x, just a 1% decline could wipe you out.

Crypto markets trade 24/7, and volatility is high. Bad news, a big whale dumping, even a tweet can cause over 1% swings within minutes. In such a market, ultra-high leverage is like holding a short fuse on a bomb—no one can guarantee when it will explode.

The scariest part is that liquidation often doesn’t happen gradually. Most of the time, your position is liquidated instantly. When market liquidity is low and slippage is severe, the liquidation price and the actual execution price can differ significantly. You might have only intended to lose 20%, but suddenly you’re wiped out by 110%, or even end up owing the exchange money.

**03 Why Do Some Still Throw Themselves Into the Fire**

Honestly, high leverage appeals to the most easily triggered part of human nature—gambling. The thrill of turning 100 bucks into 10,000 with 100x leverage is much stronger than the satisfaction of making 10,000 with 100,000. Every successful bottom-fishing or market reversal reinforces this thrill, making people feel like they’re psychic.

They wake up only when liquidated, but it’s too late.

There’s also a psychological trap—small investors often can’t afford to lose. Maybe 1,000 USD is half a month’s living expenses. Once they lose the bet, they’re forced to add leverage and increase positions, trying to quickly recover. The result? They sink deeper and deeper, eventually losing all their capital.

**04 What Should You Do**

First, know your risk tolerance. If losses impact your life, don’t use high leverage. 2x, 3x, at most 5x. That’s not being timid; it’s about surviving longer.

Second, always set a stop-loss. Whether it’s a stop-loss order or a mental stop, it must be in place. Many say, "I’m long-term bullish," but perpetual contracts are not spot trading. If your account gets liquidated, there’s no "long-term" anymore.

Third, understand what mode you’re using. Isolated margin limits your loss to a certain amount, but once liquidated, that part of your capital is gone. Cross margin is more dangerous—one position’s explosion can wipe out your entire account.

Finally, always ask yourself—do I know where the liquidation line is? How much does the market need to drop before I get out? This isn’t paranoia; it’s insurance for survival.

Leverage is always a neutral tool. Whether you profit or lose depends never on leverage itself, but on how you use it.