Roger Ver Fiasco Highlights Dangers of Leverage Trading

Reading Time: 3 minutes
  • The situation engulfing Roger Ver is an extreme example of why leverage trading should be avoided
  • Ver owes yield platform Coinflex $47 million after allegedly being liquidated in a Bitcoin Cash leverage trade
  • Users now face an anxious wait to see if Ver’s actions will lead to their holdings being lost

The potentially ruinous situation between yield platform Coinflex and the man once labelled ‘Bitcoin Jesus’ Roger Ver has highlighted starkly the perils of leverage trading and what can happen when it’s taken to its extreme conclusion. Ver is supposedly the man behind a $47 million black hole in Coinflex’s books, which means that it can’t honour customer withdrawals, a black hole that seems to have come about through Ver taking a huge long position, or series of positions, on Bitcoin Cash using borrowed money. What has resulted is a mess of epic proportions that shows why leverage trading is best left to those paid to do it.

Ver Swapped a Pile of BTC for a $47 Million Debt

We have already covered the dangers associated with leverage trading and trading of any sort using money that isn’t yours. Even money that is yours should only be used for trading or investment of any type if you don’t mind losing it. While the Ver case might be an extreme example, it is nevertheless a good one to illustrate the dangers of taking it too far.

Roger Ver got involved in Bitcoin in 2011 when one bitcoin was worth just a few dollars, investing over a million dollars in various crypto startups, including Coinflex in 2019, as well as holding a huge amount of bitcoin himself. For most people, this would be enough to set them up for life, but Ver pushed the Bitcoin Cash narrative, supposedly selling all his bitcoin in December 2017 and putting everything into BCH.

Revenge Trade or Greed?

BCH has suffered more than many in the crypto downturn, leading to Ver seemingly trying to make back his losses by using his influence to borrow tens of millions of dollars in margin and betting that BCH would go up in price. This unbelievably risky play could be termed as revenge trading, where you make a high risk/high reward play to revert losses already made, which is something that traders always urge against making.

Ver doesn’t seem to have paid attention to this and put everything into this BCH basket, going long just as the bear market is getting started, with the result that Coinflex was forced to margin call him when he was a staggering $47 million underwater. Of course we don’t know what Ver’s personal financial situation is, but the fact that he has not just refused to honour his debt but has accused Coinflex of lying suggests that he has essentially blown himself up.

As a result of Ver’s actions, whether borne of greed or desperation, Coinflex users now face an uncertain wait to see if they can get their money back from the platform. Coinflex is of course partially at fault here as they shouldn’t have allowed Ver to take his gambling to an extent where it could harm other users, but this was instigated by Ver who clearly thought he could read the markets well enough to borrow more money than most people in the world will ever earn in their lives and place it all on a ramped up leverage trade.

Leverage Trading is Best Left to the Professionals

Of course, any leverage trading you might engage in won’t be anything like to this scale, but when someone as experienced in the space as Ver can be overcome by the heady scent of a high leverage win to the point where he might cause the downfall of a company he helped establish, it’s clearly something that is best left alone.

The gains one can make in a cryptocurrency bull run are massive enough anyway, without needing to pile extra jeopardy on top of it. Doing so, especially to the extent that Ver has seemingly been doing, speaks to either desperation to get out of a financial hole or a desire for the rush of being a high roller. Unlike the roulette wheel, which at least is honest in its unfairness, the cryptocurrency market is manipulated in order to force traders out of their positions, handing over their money to the exchanges through liquidations or selling into the hands of big players.

When the cards are already stacked against you by invisible but very real forces, don’t copy Ver and put your financial future and, in his case his reputation, on the line and just keep away from leverage trading.