Binance hack losses hit leveraged traders hardest, DayTrading.com CEO says

The biggest market losses following the record $6.3 billion Binance hack fell on leveraged traders rather than customers whose assets were stolen, Tobias Robinson, CEO of DayTrading.com, said in commentary shared with Crypto Briefing.

Binance has pledged to cover the stolen assets using company reserves, protecting customer balances. However, the market selloff following the October 29 breach triggered approximately $1.68 billion in liquidations across crypto exchanges, including $1.43 billion in long positions.

Around 256,000 traders were liquidated as Bitcoin dropped nearly 5% within hours. Robinson said the decline was enough to wipe out traders using 20x leverage, with forced selling pushing prices lower and triggering additional liquidations.

More than $600 million in positions were liquidated within an hour of the news, he said, illustrating how leveraged positions can amplify sudden market declines.

Robinson warns against excessive leverage

Robinson said traders can estimate their liquidation threshold by dividing 100 by their leverage. Under that simplified calculation, a 20x position can withstand a price move of approximately 5%, compared with 10% at 10x leverage and 20% at 5x.

Actual liquidation thresholds are typically closer because of maintenance margin requirements and trading fees.

For example, a trader opening a $20,000 long position with $1,000 in margin at 20x leverage could lose the entire stake after a 5% decline. The same $1,000 margin at 3x leverage would lose approximately $150 from an equivalent move, leaving the position open.

Traders should “size the position for the worst hour, not the average day,” Robinson said, recommending that investors assess the impact of a sudden 10% decline before opening leveraged positions.

He also warned that stop loss orders may execute below their intended prices during sharp selloffs, while isolated margin can prevent losses from spreading to other positions in an account.

Robinson noted that UK retail traders have been subject to restrictions on crypto derivatives since January 2021, when the Financial Conduct Authority banned their sale.

However, traders accessing leveraged products through offshore platforms may lack equivalent protections and should not expect compensation from UK financial protection schemes, he said.