Imagine you want to secure your crypto assets on a cold wallet. You buy a brand-new one, you set it up, make sure you do everything right and start storing your crypto on it, only to discover later that your funds suddenly disappeared… Someone else had your recovery phrase all along.

Well, that’s pretty much what seems to be happening for some Ledger devices. After the crazy Coldcard heist this summer, hackers are not stopping. Let me tell you more about it.

First things first, what is Ledger?

Ledger is one of the biggest names in crypto security, building hardware wallets that keep your private keys secured and your crypto offline. These devices help you protect your crypto from online hackers trying to steal your assets.

They are what we commonly call cold wallets, supposed to be one of the most reliable ways to secure your crypto. But Ledger has just experienced an unexpected issue…

The Spy Device Attack

On October 9, Ledger raised the alarm after users in Southeast Asia reported their crypto disappearing from their wallets despite never sharing their recovery phrases. How is that possible?

Well, there is something to have in mind first. Ledger is a physical product seller, and to distribute its devices around the world the company collaborates with resellers. That’s where the issue started.

The users who saw their funds disappear had bought their Ledger devices from CryptoBilis, an official reseller whose ownership changed earlier this year. So, Ledger quickly asked the company to suspend sales and shipments while it investigated.

A few days later, Ledger confirmed that at least one device contained an unauthorized hardware implant… In other words, there was a spy inside.

This implant could read the 24 recovery words displayed during setup and send them to attackers over a mobile network. Once the attackers have those words, they can recreate the wallet and drain its funds without ever touching the original device. Yep, pretty scary.

And even worse, the modified devices could apparently still pass authenticity checks because the implant reportedly left Ledger’s security chip and operating system untouched…

On October 15, Ledger shared its official response, revealing more details about how the attack was carried out.

According to the company, a highly organized criminal group spent months buying genuine Ledger devices, opening them, installing custom-built hidden components, and putting them back into circulation through resellers in Southeast Asia. The group also built its own infrastructure to collect recovery phrases, drain wallets, and launder the stolen funds.

Ledger says the attackers spent millions preparing the operation. As for the damage, independent investigators estimate that more than $90 million may have been stolen, although Ledger has yet to confirm the total.

From Southeast Asia to Europe?

Things started in Southeast Asia, where CryptoBilis mainly operates, but it got more complicated after a few days.

Former Mt. Gox CEO Mark Karpelès reported finding a Ledger is one of the biggest names in crypto security, while a customer in Germany reported suspicious components inside two devices bought from separate MediaMarkt stores. So the problem appeared to be broader than expected.

On October 13, MediaMarktSaturn pulled Ledger products from its stores and websites across all its markets as a precaution. Ledger also asked resellers in six Southeast Asian countries and Hong Kong to suspend sales as investigations continued.

There’s an important note to take into account here: Ledger has confirmed losses linked to CryptoBilis, but has not verified any theft involving devices purchased elsewhere.

Ledger says it sent teams to Germany to purchase and inspect devices from stores and also examined samples from warehouses. According to the company, every unit its teams examined was clean. This does not confirm that every device reported as suspicious elsewhere has been independently cleared.

The company maintains that its own systems, security chip, operating system, and servers were not compromised, describing the incident as a localized attack on its distribution channel.

On a lighter note

Ledger is not the only cold wallet option out there. Other popular companies provide similar services but with a different approach.

In the case of Tangem, for example, its hardware wallets are built in the shape of a credit card or a ring that you use through NFC to connect to your wallet on your mobile.

The very different design makes this particular type of spy device harder to implement… and some users had “jokes” about it.

What’s next?

Ledger is continuing its investigation into who tampered with the devices and how they entered the distribution chain, working with law enforcement and security experts to trace the stolen funds and dismantle the attackers’ infrastructure.

Naturally, the company is also tightening security measures for its authorized resellers.

In the meantime, if you’ve bought a Ledger recently, follow Ledger’s official safety guidance, never use a recovery phrase supplied with a device, and be extra cautious if your wallet came through a reseller mentioned in the investigation.

We should get some important answers in the coming days, hopefully, so check out Ledger’s official X account to keep yourself updated.

It really feels like we’re living in a crypto movie this year.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

For many traders, stop-loss (SL) and take-profit (TP) orders are some of the earliest concepts they are introduced to. At their absolute core, both of these are conditional exit instructions. A stop-loss is purposely designed to cap your downside. It acts as an emergency brake if the market turns against you. 

Meanwhile, a take-profit order does the exact opposite. It closes out your position at a chosen, favourable level. You lock in those gains automatically. In the real world, they may not close your positions at the exact trigger price you set because of how volatile the market can be on some days. 

However, they remain very vital tools in risk management that every trader needs in their arsenal against the volatile and deeply unpredictable market. So, let's explore exactly how they work. 

How a Stop-Loss Order Works 

A stop-loss order is simply a conditional exit instruction that works like a trigger. When you set a stop-loss order, you are essentially telling your broker or exchange, If Bitcoin price drops to $75,000, close my position. The price '$75,000' is your trigger.

But here is where a massive misunderstanding happens. Activating the trigger does not magically sell your asset at exactly that price. Once the trigger is hit, your instruction instantly converts into a regular market order. It is then thrown into the order book to find the next available buyer.

You need to heavily distinguish the quoted stop level from the actual price available in the order book when execution occurs. They are often two different things. If the market is tanking fast, the next available buyer might be significantly lower than your trigger.

The order just wants to get you out, regardless of the price. This is why that quoted number is just an alert system and not always set in stone. So, while you may have wanted out at $75,000, your order may just be closed at $74,950 or $74,985. 

How a Take-Profit Order Works 

A take-profit order is the opposite of a stop-loss. If you hold a long position (profiting when prices rise), you place this order above the current market price. If you hold a short position (profiting when prices fall), you set it below.

Usually, this triggers a limit order. Using the same example, you are telling the exchange, "Sell my BTC, but only when it hits $75,000." If you choose a limit order take-profit, your trigger price can just sit there without getting unfilled. 

If the price lightly kisses your target but there aren't enough buyers at that level to absorb your BTC, your order remains pending. Always verify the specific mechanics with your provider before committing real capital.

Stop, Stop-Limit, Trailing Stop and Bracket Orders 

When it comes to closing a trade with SL and TP, there is more than one way to go about it. While some options prioritise the speed of closing a position, others lean more into price control. You have to decide which trade-off you are willing to accept.

Before diving into complex setups on any app, verify which of these specific order types are available for the specific Venga product you are trading.

A stop-limit order is particularly tricky. You set a trigger, but instead of a market execution, it fires off a limit order. If the market is plummeting, your limit order might just sit there like a ghost. The price dropped too fast, bypassing your limit entirely.

The trailing stop is excellent for letting winners run. It drags your exit point higher as the asset climbs. However, set it too tight, and normal market noise will shake you out before the real move even happens. You trade execution certainty for price control, or vice versa.

Setting Levels From a Trading Plan 

Successful traders are known for applying effective risk management to all their trades. Stop-loss and take-profit orders are important tools that help you base your exits on cold, hard data, not gut feelings.

The markets, on a day-to-day basis, are entirely too different from one another to apply a one-size-fits-all percentage. These risk management tools help you remain grounded as you take every single trade. So, to apply them properly, you need to use these three educational approaches:

• The Invalidation Point: Where does your trade thesis completely fall apart? If you bought because of an upward trend, put the stop just below where that trend structurally breaks.
• Volatility-Based Distance: Give the trade room to breathe. Use tools like the Average True Range (ATR) to place your stop outside the normal, everyday price wiggles.
• Fixed Monetary Risk: Decide exactly how many dollars you are willing to lose. Then, calculate your stop distance based on that exact dollar amount.

Position Size and Maximum Loss 

This is where the math of risk management gets real. Your entry, your stop distance, and your amount at risk are mathematically locked together. Imagine you have a $500 maximum risk threshold. You enter an asset at $50. Your logical stop is at $45. That is a $5 risk per unit.

Calculation: $500 (Max Risk) / $5 (Risk per unit) = 100 units.

You can safely buy 100 units. But remember, this is just theoretical math. The markets on a daily basis, especially crypto, can be really choppy and unpredictable. 

Your realised loss might be quite different. A sudden market gap, heavy slippage, trading fees, or platform liquidation rules can quickly push your actual loss past that planned $500 limit.

Reward-to-Risk Is an Estimate 

If there's any one thing traders love to brag about, it's the reward-to-risk ratio on their winning trades. They set a take-profit order at $135 and a stop-loss order at $45. That creates a neat, planned 3:1 reward-to-risk ratio. It looks brilliant on paper. 

But a planned ratio is just a hypothesis. It doesn't mean the trade is inherently profitable. Your actual outcome is determined by cold realities: the probability of the setup, the actual fill quality you get, and the accumulated costs of doing business. 

A perfect ratio means nothing if the market probability is against you. Always treat stop loss and take profit levels as moving targets in your overarching strategy, not guarantees of wealth.

What Can Go Wrong After the Order Is Placed 

Opening a position and setting your stop-loss and take-profit orders is just half the step. After you've set your preferred trigger prices on the exchange servers, a dozen different market mechanics can completely derail your plans. There is no such thing as being too safe from market mechanics.

Let's talk about market gaps. If an asset closes at $100 on Friday and opens at $80 on Monday, your $90 stop gets triggered instantly at $80. You suffer massive slippage. Rapid markets and temporary price spikes are equally dangerous.

A momentary glitch or a massive "fat finger" sell-off can trigger a stop-loss order cascade. Prices plummet for just a second, hit your stop, and then bounce right back up. You are left out of the trade, staring at a loss while the asset climbs. 

This is why separating the risks of market orders from limit orders is so vital. The major risks you might face after placing an order are:

• Market Order Risks: A market-based stop guarantees you exit, but exposes you to terrible pricing in thin liquidity and against catastrophic slippage.
• Limit Order Risks: A limit order protects your price, but in a rapid market, you might suffer a partial fill or completely miss if the price moves too quickly.
• Platform Outages: Exchanges crash during high volatility. If the engine goes offline, your conditional orders are effectively frozen.

In a normal setting, you're likely not to face these risks often. However, they remain a possibility, regardless of the platform you place your trades on, and as such, you should be prepared for them should they happen.

Worked Scenario: Planned Exit vs Actual Fill 

Let's use an example scenario on a hypothetical crypto order book to illustrate this. Assume it is September 20th, 2026. You are trading a hypothetical coin called Zenith (ZEN). You bought 10 ZEN at $1,000 each, making it $10,000 in total. 

You have a policy that allows you to lose a maximum of 5% of your entire portfolio, which is $500 in this example. So, you placed a stop loss order at $950.

Planned Loss: $50 per coin x 10 coins = $500.

Then, a large whale releases ZEN into the world. The price is reduced immediately. When you hit $950, your stop is hit and your market sell order is executed. However, the order book is very light.

That is what is on offer from the bid side:

• 2 ZEN available at $948
• 5 ZEN available at $940
• 3 ZEN available at $925

Your order eats through them all and you have your order filled. Let's figure out the actual cost.

• 2 ZEN x $948 = $1,896
• 5 ZEN x $940 = $4,700
• 3 ZEN x $925 = $2,775

Total Revenue: $9,371.

You did not have an average price of $950 for your execution. It was $937.10. This means that you lost an additional $129 to unplanned slippage. Next, let's add a hypothetical transaction fee of 0.2% on the $9,371 amount being exited (approx. $18.74).

Using this example, you lost more than the $500 you initially set as your stop loss because of the volatility of the market.

Your original Investment: $10,000.

Final Revenue after fees: $9,352.26.

Realised Loss: $647.74.

Please note that these examples above are just hypothetical and not a true representation of what always happens in the market. Unless actual product data is provided, do not emulate current Venga pricing based on this.

This is precisely why a strict stop-limit order can be problematic in crypto. But if you were asking for precisely $950, you may have only sold 2 coins before that price was completely away from you. 

The truth behind the closing of your book is, in essence, defined by order book liquidity. The higher the liquidity of the exchange you choose to trade on, the closer the closing price will be to the exit price you set in your stop-loss and take profit orders.

When These Orders May Not Fit 

Like other risk management tools, patterns, and indicators, stop-loss and take-profit orders are not magic bullets. They are simply tools that should be used by a trader to make better judgments in the market, and not to be relied on blindly.

In the real world, there are times when a standard stop-loss order is actually detrimental to your portfolio. This is why a trader should know when to either turn off a stop-loss order or give them more room to breathe.

Take long-term holdings, for example. If you are holding an asset for five years, setting a tight stop makes you incredibly vulnerable to short-lived, meaningless price wiggles. You will simply get shaken out.

Another time when a trader may need to adjust or turn off their stop-loss orders is when trading illiquid assets. If you are trading an asset that only a handful of other retail traders are trading, your automated exit will cause massive damage to your own price when it finally triggers.

Another example is markets with discontinuous pricing. For example, there are certain weekend OTC markets that render your standard stops nearly useless. There are also indices on certain brokers that follow this trend. In these markets, the price doesn't flow like in a regular market; it jumps. Wherever the price lands, that becomes your automatic exit price, assuming there is enough liquidity at that point also. 

Sometimes, trading strategies simply have no tested exit logic tied to a specific price. They rely on time or fundamental data. In these cases, concepts like hedging or options contracts might serve as better alternatives to rigid price stops.

Conclusion: Automation Does Not Remove Judgment 

The automation that stop-loss and take-profit orders give is fantastic, but it does not remove the need for your own human judgment. They are conditional orders, which means they perfectly control the attempt to exit the market. 

They control the precise moment your intent is broadcast to the exchange. What remains entirely uncontrolled is the market's reaction to your order. You cannot control liquidity, you cannot prevent gaps, and you cannot force another human being to buy your asset at your preferred price.

Before placing any order, you absolutely must understand your platform's specific routing rules. You need a feel for the daily liquidity. Above all, understand your maximum affordable loss. Because when the screen goes red, no algorithm can save a poorly sized position.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

Contrary to the story sold on social media, a single profit does not prove a great strategy and a single loss doesn't prove you have a bad one. This is why professional traders spend time reviewing every single trade they place.

A highly useful trade review records your execution and your strict rule adherence immediately after each trade, while genuine performance conclusions require a vast series of comparable trades. In this review, we'll go through the key metrics to add to your journal on your journey to becoming a sustainably profitable trader.

Data to Capture for Every Trade 

If you want to get better and more profitable in trading, you need a meticulous trading journal. But what exactly should go into it? First, stick to the facts, keeping in mind that every piece of information is important. 

You need to record the instrument traded and the direction (long or short). Log your exact entry and exit times. Track your position size. Note your planned risk versus your actual fills. Don't forget to include those pesky fees.

Keep your subjective notes entirely separate from your numeric fields. The numbers you record can be calculated and charted, while the emotions in your subjective notes cannot. 

If your trading journal mixes, I felt anxious and bought at $150, filtering your data later becomes a nightmare. Lastly, after closing every position, tag the setup. Record the specific reason for your exit. Was it a target hit, a stop out, or a time-based exit? Note it down.

R-Multiple and Planned Risk

In your trading journal, 'R' will appear very often. 'R' simply stands for your planned amount at risk. If you plan to risk $100 on a trade, 1R is $100. Every single result should be expressed relative to this number.

If you made $300 on that trade, that's a +3R trade. If you lost $50, that's -0.5R. This normalizes your data, making a solid trade review possible regardless of changing account sizes. It also gives you a realistic look at your risk-reward ratio.

But here's the catch. Slippage and discretionary exits can totally wreck your planned 'R'. You might plan a 1R loss, but terrible execution during breaking news turns it into a -1.5R disaster. Tracking the difference between planned risk and realized risk is critical.

Process Metrics Before Outcome Metrics 

Before you begin obsessing over the dollar signs, take a hard look at your actual execution. Did you even follow your own meticulously crafted rules? Trading rules are not going to give you the desired results if you don't follow them.

It's vital for you to process your adherence extensively, which covers your entry, your sizing, and your exit protocols. It also demands an answer to a critical question: did the trade organically match the intended market condition?

While some traders use quality scores ranging from 1 to 10, we believe scores that most amateurs use. Instead, force a simple yes, no, or partial scale. Did you follow the precise plan? Yes. Did you recklessly oversize? No. This keeps your trade review brutally, refreshingly honest.

Execution and Cost Metrics 

Every trading rule is just as good as the quality of the execution. In your trading journal, you must calculate your entry and exit slippage. How far away from your intended price did you actually get filled?

Just as importantly, calculate the total fees you spent on the trade. While they may look negligible, especially when displayed as 0.1% maker/take, they can add up much faster than you think. So, tally up your total fees, commissions, spreads, and funding rates. 

State the specific benchmark you use for your expected price. Is it the bid/ask midpoint at the time of your signal? Finally, log your total holding time. Time is money, and holding a position ties up your capital.

Maximum Adverse and Favourable Excursion 

Maximum Adverse Excursion (MAE) and Maximum Favourable Excursion (MFE) strictly measure the extremes of a position.MAE is the absolute largest price move against your position while it remained open. 

Conversely, MFE is the absolute largest move in favour of it. They brilliantly tell you how much heat you absorbed, and exactly how much loose change you left on the table. 

These vital trading metrics actively inform your exit review without relying on toxic hindsight bias. You cannot legitimately rewrite your original decision with future path information, but you can certainly learn if your stop-losses are consistently choked too tight.

Performance Metrics for a Series of Trades 

Looking at a single trade review is like staring at a single pixel and trying to guess the entire movie. It's impossible. You absolutely need a series. A proper sample size transforms raw, chaotic noise into actionable trading metrics. 

This happens because variance is a notoriously cruel master. Judging your shiny new system on three consecutive wins feels fantastic. It is also completely scientifically bankrupt.

You need to define a mathematically sufficient group of trades before you even glance at these heavier numbers. While ideally you need at least 100 trades, you can begin with 30-50 trades. Once you cross that statistical threshold, the real truth of your performance finally emerges.

Holding Time, Exposure and Capital Use 

Time is capital. Literally. Many amateur traders obsess over pure returns while entirely ignoring the brutal cost of time. You must relentlessly track your average holding period, your total time exposed to live market heat, and the actual cash committed. 

Two wildly different strategies can easily boast identical 20% annual returns. But let me tell you, their underlying mechanics will demand totally different psychological endurance.

If Strategy A violently ties up your entire portfolio for agonizing weeks, and Strategy B seamlessly gets in and out in smooth minutes, they are fundamentally entirely different beasts. One drains your liquidity; the other frees it up.

From the table, we can see that Strategy A leaves you totally exposed to sudden overnight news bombs while Strategy B lets you sleep like a baby. Same return. Wildly different trading metrics.

Win Rate and Average Win or Loss 

Your win rate is a great showoff number, but it rarely tells the whole story. It is an incredibly incomplete, frankly dangerous vanity metric that feeds your ego but starves your account.

Winning a glorious 80% of the time means absolutely nothing if your bloated losers constantly wipe out your tiny winners. You have to fiercely examine the relationship between your strike frequency and your eventual payoff size.

While your ego would force you to have a high win rate, the math of the market does not care. A highly professional trader might only win 35% of the time. However, their unique combination of a modest win rate, alongside a massive average win versus a tiny average loss, is where the genuine edge actually lives.

Expectancy 

Trading expectancy is the metric that will pump life into your strategy. If this number is negative, you are slowly bleeding out. If it is positive, you have a legitimate profitable trader. The formula is:

(Win Probability × Average Win) - (Loss Probability × Average Loss)

Let's use a simple example where Trader A has a 40% win rate. While many traders on social media will consider this rate low, he has an average win of $300. Trader A may lose 60% of all his trades, but he caps his average loss at $100.

(0.40 × $300) - (0.60 × $100) = $120 - $60 = $60.

It means that he has a trading expectancy of a positive $60 per trade. This $60 profit applies to both winning and losing traders. Over a large series of trades, this will certainly add up. But remember, always label this calculated result for exactly what it is: a purely historical sample estimate, absolutely not a magical crystal ball reliably forecasting the future.

Profit Factor 

If you want to check whether your strategy is sustainably profitable, then you must rigorously check the profit factor. It strips away all the complicated noise. It is quite simply your gross profits cleanly divided by your gross losses. 

If your trading journal shows you made $12,000 in total winning trades this quarter, and lost $8,000 in total losing trades, your profit factor is exactly 1.5. A profit factor resting barely above 1.0 is technically deemed profitable. However, it is also too close for comfort. 

Most highly robust systems aim significantly higher than 1.5 to safely absorb inevitable market shocks and savage execution slippage. When calculating this, keep a hyper-vigilant watch out for wild outlier trades. One lucky $10,000 lottery-ticket win can massively skew your profit factor and feed you deeply false confidence.

Drawdown and Losing Streaks 

While most traders brag about their win rate, losing tests the resolve of a trader more than anything else. Your maximum drawdown is the peak-to-trough decline of your trading account. It tells you exactly how much pain you endured before recovering to new highs.

You hit an all-time high of $50,000. Then, the market violently turns against your edge. A string of losses drags your account down to $40,000. That brutal 20% drop is your maximum drawdown for the period.

Sequence matters immensely here. Even if your trading expectancy is highly positive, a severe losing streak can trigger a crippling maximum drawdown. Avoid looking for a single acceptable threshold that applies to every single trader.

Because your strategy and approach are different, a 15% maximum drawdown might be acceptable for an aggressive crypto strategy but completely unacceptable for a conservative retirement portfolio.

Recovery Time and Sequence Risk 

How long did your account sit deep in the red zone below its previous peak? That, my friend, is your true recovery time. This metric is heavily tied to your psychological capital. 

If your maximum drawdown lasts for 18 months, do you have the discipline to keep trading the system? This highlights sequence risk. The exact same trades, shuffled in a different order, can result in wildly different trading experiences.

If you get hit with ten losses in a row right out of the gate, you might abandon a perfectly good strategy. Again, keep this metric historical. It tells you what happened, not what will happen next.

Original Example: Five Trades Are Not a Conclusion 

Let's build a small trading journal log to prove an essential point. Imagine you execute five textbook trades.

After five trades, you have 3 wins and 2 losses. Your risk-reward ratio looks great. Your profit factor is heavily skewed positive. Now, imagine Trade 6 is a massive gap-down where slippage results in a -4R loss.

Suddenly, your profit factor plummets. Your trading expectancy turns negative. This is exactly why five trades are completely useless for making concrete conclusions. The sample is simply too unstable. You need 30, 50, or even 100 trades to smooth out the noise.

Segment Results to Find Useful Patterns 

If you follow your trading rules dutifully and journal them, over time, you'll get to a point where you have enough data. When that time comes, you need to divide your results and compare them by setup to help you find where your edge in the market is.

Compare your historical outcomes by specific setup type, asset class, precise timeframe, trading session, or broader market regime. You might shockingly find you're a certified genius at trading morning tech equities, but utterly terrible at grinding afternoon forex markets.

A stark word of warning: slicing your precious data too intimately thin creates completely false patterns. Always aggressively enforce a strict minimum sample rule before recklessly tweaking your strategy based on a hyper-filtered result.

Tagging Rules and Data Quality 

Your dedicated trade review is strictly only as good as your underlying data quality. Painstakingly define your custom tags before you even start analyzing the spreadsheets.

Keep your chosen category names strictly, unwaveringly stable. If you formally call it a breakout on a sunny Monday, don't suddenly call it a momentum shift on a rainy Thursday. Be absolutely sure to honestly record missing values, too.

Most importantly, deeply avoid the siren song of hindsight tagging. Actively changing labels right after seeing the painful result violently creates imaginary patterns that were never, ever genuinely present in the heat of the moment.

A Review Rhythm That Separates Learning From Noise Distinguish 

While the market can be fast-paced and force traders to make quick decisions, you need to develop a rhythm. Clearly distinguish between your immediate after-trade data capture, your deeper weekly process review, and your highly periodic strategy evaluation.

Capture the raw, unfiltered data immediately while it's still fresh in your mind. Review your strict adherence to the process at the quiet end of the trading week. Only evaluate the important factors, actual strategy metrics like your long-term risk-reward ratio and rolling maximum drawdown. 

You can evaluate quarterly or after a substantially large block of trades. Another very important note is to avoid mentally changing your core rules right after every single outcome. If you do, you'll add more noise than you need to your data.

Conclusion: Measure Decisions and Results Separately

Your daily trade review should focus strictly on the small things that matter. After every trade, ask yourself Did I follow the rules? Did I execute cleanly? These will make up your decision metrics.

On the other hand, your longer-term trading metrics, including your average win, average loss, and profit factor, belong to a series of trades. These are your outcome metrics. They are both important metrics, but shouldn't be confused.

The ultimate purpose of a trading journal isn't to guarantee improvement. It is to provide crystal clear, undeniable evidence for review. It separates the stories you tell yourself from the reality of the market. And in trading, reality is the only thing that pays.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

On most perpetual futures screens, next to the price, you'll spot a tiny percentage with a timer counting down beside it. That's the funding rate. Of everything on the page, it's probably the bit newcomers ask about most.

A funding rate creates periodic transfers between long positions and short positions, and its job is to keep the perpetual contract trading close to the spot price of the asset.

For the trader, funding is a carrying cost or a receipt. On most venues it isn't a fee paid to the platform, and it isn't a reliable forecast of where the price goes next.

Worth knowing: On Binance, Bybit, OKX, and Hyperliquid, funding is peer-to-peer. It moves between traders holding opposite positions, and the exchange takes no cut of the funding payment. Trading fees are charged separately.

Why Perpetual Futures Need a Funding Mechanism

A traditional futures contract has an expiry date. On that date it settles against the underlying market, so its price gets pulled towards spot as expiry approaches. Anyone who wants to keep their exposure has to close the old contract and open the next one, a process called rolling.

A perpetual contract simply removes the expiry. You can hold it for an hour or for a year without rolling anything. BitMEX brought the format to a wide audience with its bitcoin perpetual in May 2026, and perpetuals have since become the most popular way to trade crypto futures.

Without a settlement date, though, nothing forces the perpetual back towards spot. Funding fills that gap. Think of it as a rubber band: the further the contract drifts from spot, the harder the payments pull traders towards the side that closes the gap.

Dated Futures vs Perpetual Futures

One caveat. Funding narrows the gap between a perpetual and spot, but it doesn't erase it. Perpetuals can trade at a premium or a discount for long stretches, especially when markets move fast.

Funding Timestamps and Eligibility

Funding isn't charged continuously. It's exchanged at fixed settlement times, which on many venues fall every eight hours at 00:00, 08:00 and 16:00 UTC (Coordinated Universal Time).

As a general rule, a position in a perpetual contract has to be open at the settlement time to pay or receive funding. Close before it and you're out of that round. Open just after it and you've skipped it.

Each venue words this a little differently. Binance, for one, says the funding transaction can land up to 15 seconds after the timestamp, so a position opened at 08:00:05 UTC could still pay or receive funding. Trading in the seconds around a timestamp leaves it to chance.

It also helps to separate two numbers. The funding rate displayed during the interval is an estimate that keeps updating (Bybit recalculates it every minute). The rate actually applied is the final figure fixed at settlement.

Who Pays When Funding Is Positive or Negative

The usual convention is straightforward. When the funding rate is positive, long positions pay short positions. When it's negative, short positions pay long positions.

A positive rate generally means the perpetual has been trading above spot. The payment makes holding a long slightly more expensive and holding a short slightly more rewarding, which tends to pull the two prices closer. A negative rate works the other way round.

Binance, Bybit, OKX and Hyperliquid all follow this direction. Their formulas, intervals and caps still differ, sometimes between contracts on the same exchange, so the current contract specification is the place to confirm how a given market works.

Funding Rate, Premium and Interest Components

Most large exchanges build funding rates from two ingredients: a premium component and an interest component.

The premium measures how far the perpetual is trading from its index price, a reference spot price blended from several markets. It's sampled repeatedly during the interval and averaged, so one sudden spike can't set the rate by itself.

The interest component is a small fixed baseline. On standard contracts at the four venues covered here, it works out at 0.01% per eight hours. A limiting step, which exchanges call a clamp, keeps the funding rate at that baseline whenever the premium is small.

Because sampling continues until settlement, the displayed rate can drift during the interval. One exchange's formula also shouldn't be transplanted onto another's contract, since averaging methods, price sources and caps all vary.

How a Funding Payment Is Calculated

The general formula is short:

Funding payment = position notional × funding rate

Notional is the full value of the position, usually the contract size multiplied by the mark price (the exchange's fair-value price for the contract). It isn't the margin you put up.

Picture a €5,000 long. Settlement arrives and the funding rate is sitting at +0.02%, so €1 leaves the long's margin (5,000 × 0.0002 = 1). Someone holding a short of the same size receives €1. At −0.02%, the flow reverses.

Leverage doesn't appear in the formula, but it changes how much each payment matters. If that €5,000 long was opened at 5x leverage, the trader's margin is €1,000. The €1 funding payment is then 0.1% of the capital at stake, not 0.02%.

Most perpetuals settle in stablecoins such as USDT or USDC. The euro figures just keep the maths easy to follow.

Annualised Funding Figures Can Mislead

Some dashboards convert funding rates into a yearly figure. The method is simple: multiply the rate per interval by the number of intervals in a year.

Take the common baseline of 0.01% every eight hours. With three settlements a day, the yearly figure is 0.01% × 3 × 365, or 10.95%. Push the funding rate up to 0.05% per interval and the same sum gives 54.75%. On a dashboard, a number like that grabs attention.

The catch is that this assumes the rate stays exactly where it is for twelve months. It won't. Funding can change at every interval, flip from positive to negative, and drift back to the baseline within days.

Why this matters: An annualised funding figure is a comparison aid, handy for putting two venues or two moments side by side. It isn't a promised yearly cost, and it isn't a promised yearly return.

Comparing Funding Rates Across Exchanges

Comparing funding rates between exchanges only works when you compare like with like. That means the same contract (BTC against USDT, say), the same quote currency, the same interval, and rates taken at the same timestamp.

Intervals catch people out most often. Say one venue shows 0.03% and another shows 0.01%. The second looks cheaper. But if it's charged hourly, eight payments of 0.01% come to 0.08%, well over double the first venue's 8-hour charge.

Method matters too. Binance, Bybit, OKX and Hyperliquid, four large venues for crypto futures, each set their own caps, index prices and settlement frequencies. Some shorten the interval automatically once the rate hits its limit.

How Four Major Venues Handle Funding

Contract specifications checked September 2026 from each venue's funding documentation: Binance, Bybit, OKX and Hyperliquid. Exchanges revise them, so the live contract page is always the source to trust.

How Funding Changes the Economics of a Position

A single funding payment is usually small. The effect builds when a position is held through many intervals.

Run the numbers on a €10,000 long. At the 0.01% baseline, funding costs €3 a day and €21 over a week, assuming nothing changes. If the rate climbs to 0.05% and stays there for a week, the bill comes to €105. Those payments come out of available margin, or add to it on the receiving side.

What Funding Costs on a €10,000 Position

Assumes three payments a day and a rate that never changes. Real rates can move at every interval, so treat these as illustrations, not forecasts.

Receiving funding can create a false sense of safety. A €10,000 short collecting 0.03% per interval earns €3 per payment. If the price rises 5% in an afternoon, that short is down €500 before the next payment even lands. The price exposure is almost always the bigger number.

What a High Positive or Negative Rate May Suggest

Start with what the number actually shows. A high positive funding rate means the perpetual has been trading above its index and longs are paying to stay in. A deep negative rate means the opposite. That's the observation.

The inference is a separate step. A persistently high rate often points to crowded positioning, with lots of traders using leverage in the same direction. Crowded trades can unwind abruptly, because forced closures from liquidation push the price further and trigger more of them.

None of this turns the funding rate into a timing signal. Extreme funding rates can last for days or weeks in a strong trend, and anyone betting on a quick reversal pays funding the whole way. Sometimes the reversal comes. Other times the rate cools because the spot price simply catches up.

Funding Alongside Basis and Open Interest

Funding is one reading among several on a derivatives dashboard.

Basis is the difference between a derivative's price and the spot price. Funding rates tend to follow basis, but the two can diverge, particularly when a cap limits how far the rate can move.

Open interest is the total value of contracts still open. Rising open interest alongside high positive funding can mean new leveraged longs are arriving. Falling open interest usually means positions are being closed.

Three Readings, Three Different Questions

Each one adds a separate piece of context. Even when all three point the same way, they describe how the market is positioned now. They don't prove what happens next.

Funding, Leverage and Liquidation

Every leveraged position has a liquidation price. That's the level at which the exchange closes the position because the margin behind it has fallen below the required minimum. How high that minimum sits varies by exchange and often rises with position size.

Funding comes into it because payments are drawn from the margin or account balance backing the position. Each payment that goes against a trader shaves a little off that buffer, nudging the liquidation price closer to the current price.

Higher leverage makes this worse, because the same funding rate takes a bigger bite out of a smaller pool of margin.

This isn't only theory. Take 10 October 2025. Over $19 billion of leveraged crypto positions were force-closed that day, more than on any other day on record.

Funding-Based Strategies and Their Risks

Some traders aim to earn funding rather than pay it. The best-known approach is a cash-and-carry, or basis, trade. When funding is positive, the trader buys the asset on the spot market and opens a short perpetual of the same size.

On paper, the price exposure cancels out. If the price rises, the spot holding gains roughly what the short loses, and the short keeps collecting funding at each interval.

In practice, several things can go wrong:

• Funding can fall or turn negative before the income covers fees on both legs.
• The gap between perpetual and spot can widen, producing a loss on paper, or a real one if the trade is closed.
• A sharp rally can liquidate the short leg even though the spot leg has gained, unless extra margin arrives in time.
• Two legs mean two executions, often on two platforms, each with its own slippage.
• Assets held on an exchange carry counterparty risk if that platform runs into trouble.

That's why returns on these trades tend to be modest, and harder to capture than they look.

Worked Scenario: Holding Through Three Funding Times

Here's how three funding times could play out for one position. All the numbers are made up. We'll also pretend the position stays worth €10,000 the whole time, which real positions don't, since notional moves with the mark price.

Our trader goes long €10,000 a few minutes past midnight UTC, then sits tight through three settlements.

Worked Scenario: €10,000 Long Over Three Funding Times

After a full day, funding has cost the long €3. Any price movement on a €10,000 position would almost certainly outweigh that, in either direction.

Timing changes the outcome. Had the trader closed a minute before 16:00, they'd have paid only the first €1. Eligibility at each timestamp is what decides who pays.

Availability and Regulatory Context in Spain and the EU

Whether perpetual futures are available to you, and what protections come with them, depends on the provider, your client classification (retail or professional) and the legal structure of the product.

MiCA, the EU's Markets in Crypto-Assets Regulation, gets a lot of attention, but it doesn't cover crypto futures or other derivatives. Those usually count as financial instruments, which puts them under MiFID II (the Markets in Financial Instruments Directive) instead.

ESMA, the European Securities and Markets Authority, addressed perpetuals directly on 24 February 2026. Its message to firms was that perpetual futures giving leveraged crypto exposure are likely caught by existing national rules on CFDs (contracts for difference). If a product is caught, retail clients are covered by capped leverage and automatic margin close-out. They also get negative balance protection, meaning losses can't exceed the money in the account, plus standard risk warnings.

In Spain, a resolution by the CNMV (Comisión Nacional del Mercado de Valores) dated 27 June 2019 caps retail leverage on crypto CFDs at 2:1. It also requires positions to be closed once margin falls to half of the initial amount. A further CNMV resolution, in force since 3 August 2023, bans advertising these products to retail clients in Spain.

Products offered outside this framework may not carry the same protections.

EU and Spain: Dates That Matter

Conclusion: Funding Is a Variable Cost, Not a Compass

Funding exists because perpetual futures never expire. It's a periodic transfer between longs and shorts that nudges the contract towards spot, with longs usually paying when the rate is positive and shorts paying when it's negative.

For anyone holding a position, it behaves like a cost or an income that can change at every interval. It adds up over time, draws on margin, and can bring liquidation closer on a leveraged trade.

What it doesn't do is predict price. A funding rate describes how traders are positioned right now. Before it feeds into any decision, the contract specification, fee schedule and margin rules for that specific market are the documents worth reading.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

What do you do when $1.5 billion worth of crypto gets stolen? You follow the money of course.

That’s basically what ZachXBT did after the $1.5B Bybit hack in 2025. The stolen funds were quickly moved across different blockchains and wallets, making them increasingly difficult to trace… but not impossible. 

But wait, do you know ZachXBT?

He’s one of crypto’s best-known on-chain investigators, basically the Sherlock Holmes of the blockchain world. However, instead of footprints, cigarette ashes or handwriting, he analyses public transactions, wallet addresses and does a lot of digging on-chain to follow stolen crypto.

His work has made him particularly well known for tracking funds connected to hacks, scams and other crypto-related crimes.

And well, this time, he went one step further and went undercover (and no, we’re not talking about the game), so get your popcorn ready for the story. 

The undercover operation

Quick reminder, the Bybit hack from early 2025, which was the biggest crypto heist ever by the way, was later attributed by the FBI to North Korean actors tracked as TraderTraitor. The stolen assets, as always, were moved through multiple wallets and blockchains as the attackers tried to make them more difficult to trace.

That’s where ZachXBT’s investigation started to get particularly interesting as you can imagine.

After the hack, ZachXBT noticed more than 15 accounts on Telegram and Discord looking for help moving funds linked to the attack.

One of them was a user called “Jimmy Green.”

ZachXBT decided to follow this Jimmy Green lead, present himself as a client, put up $349,700 of his own money and accepted a 5% loss on each transaction to build trust with the suspected laundering operation. Yeah, that’s a pretty expensive investigation…

He wasn’t simply sending money and watching what was going on. His idea was to build enough trust to get information directly from someone involved in the operation, while at the same time comparing it with what was happening publicly on-chain.

Fast forward a bit, and apparently, the talk between the two got surprisingly casual. Besides discussing the movement of billions in stolen crypto, they talked about mahjong, family, food, hunting rabbits and even Disney vacations. Because even crypto hackers can be Mickey Mouse fans, alright.

Jokes aside, the conversations may sound surprisingly normal, but they were still happening alongside discussions around moving and laundering stolen crypto. According to ZachXBT, Jimmy even shared information about how the group operated and discussed transactions involving funds linked to North Korea.

The real deal was on-chain

Again according to ZachXBT, Jimmy began revealing where funds would move before they actually moved, and apparently also shared related wallet addresses. Jackpot! It helped ZachXBT identify a cluster containing more than $12M in Bybit-linked funds moving across Bitcoin, Ethereum, Solana and Tron.

This was one of the most important parts of the investigation because ZachXBT could compare the information he was receiving privately with transactions happening publicly on the blockchain.

In one example, Jimmy shared a screenshot of himself bridging funds and ZachXBT was able to match the amounts and timing with an order visible on the THORChain explorer that had been created within minutes of Jimmy’s message.

In another case, Jimmy told ZachXBT that funds would be moved to Solana in advance. So the following day, ZachXBT observed the funds moving there, providing another piece of evidence that the conversations were connected to real fund movements. 

One thing is sure though, this investigation showed how quickly stolen crypto funds could move between different networks. 

Using some of the gathered information, ZachXBT says 442,000 USDT linked to that cluster was later frozen by Tether. This stays far from the total stolen amount but still constitutes a small win.

Additionally, he also connected other information from the conversations to the 2023 Poloniex hack and to funds linked to the sanctioned crypto marketplace Huione Guarantee.

In the Poloniex case, Jimmy mentioned that a team he knew had around $300,000 frozen in 2024, and ZachXBT was able to identify the transaction on-chain, finding that the actual amount was around 332,000 USDC.

In another conversation, Jimmy claimed to have laundered around $3M in fraud proceeds for another client, which again, ZachXBT traced to a hot wallet associated with Huione Guarantee, a marketplace that has been sanctioned by U.S. authorities and linked to illicit financial activity. Yes, he’s good!

Naturally, not every claim made by Jimmy during their conversations could simply be taken as a fact. For example, he claimed that his team had laundered most of the $1.5B stolen from Bybit, but while ZachXBT said the claim was consistent with the laundering patterns he observed, the specific amount had not been independently confirmed in full.

But overall, analysing the blockchain activity using wallet addresses, transaction amounts and timing, provided a way to compare what Jimmy was saying with what was actually happening, and allowed ZachXBT to significantly move his investigation forward.

Following the Lazarus trail

Apparently, the operation ZachXBT infiltrated was a Chinese organized crime syndicate that had laundered more than $1B across multiple exploits for the Lazarus Group.

If you are not familiar with it yet, Lazarus Group is the name commonly used for a North Korea-linked crypto hacking operation. Yes, this group has been associated with a lot of major cyberattacks and crypto thefts, and yes again, it has become one of the biggest concerns in crypto security around the world.

ZachXBT’s investigation suggested that the people helping move these funds were not necessarily hiding in some mysterious underground places. 

Some of the activity he identified started with people openly asking for help in public Telegram and Discord groups. Not so low profile.

ZachXBT also says that, since 2022, he has helped freeze more than $75M related to North Korea-linked attacks.

Why are we only hearing about this now?

Well first of all, ZachXBT mentioned he immediately shared his findings with private-sector investigators and law enforcement, but waited to publicly publish them because the investigation was pretty sensitive.

That explains why the events he described happened much earlier than his publication. Revealing all this information publicly while the investigation was still active could have compromised all the work they were doing.

And again, for this particular case, he wasn’t just putting his time into the investigation. He went fully uncovered, revealed that he personally fronted $349,700, accepted a 5% loss on every order he was making, and took on quite some personal risk by dealing with the suspected network. 

Sometimes, following stolen crypto isn’t just a case of opening a blockchain explorer and looking at a few wallets.

And then came Bitget

A couple of weeks ago, a major attack targeted Bitget resulting in $388M stolen from the platform. Well, here’s where things get particularly interesting. 

ZachXBT says that he spotted the same pattern again. 

Some illicit actors linked to this exploit were apparently openly creating support tickets in public Telegram and Discord groups, asking for help with orders involving the stolen funds. Yes, that closely resembles the pattern he originally noticed following the Bybit hack. 

The two investigations are separate, and we don’t know the full picture of the Bitget attack yet, so it would be too early to say that the same network was behind both incidents. However, this similarity is certainly something investigators will be watching closely.

In any case, we saw that even when hackers are making the trail messy, our crypto investigators are still following it. Thanks Zach!

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

You deposit €1,000. Set leverage to 10x and the trade you open is worth €10,000. That extra €9,000 of buying power is leverage.

Profit gets calculated on the €10,000, but so does any loss. If the coin drops a few percent, most of your margin can disappear, and the platform may then close the trade for you. That forced close is liquidation, and the chance of it arriving sooner than expected is what people mean by leverage risk.

Plenty of traders found this out on 10 October 2025. Over 24 hours, more than $19 billion of leveraged crypto positions got liquidated, a bigger one-day total than anything before it. Roughly 1.62 million accounts were hit, and about 87% of the liquidated positions were long, meaning they'd bet on prices going up.

This guide walks through how leveraged trading actually works, using simple euro maths, so the numbers make sense before any real money is involved.

Leverage, Margin and Position Size

Four terms come up over and over below, and they get muddled a lot. Plain definitions first.

1. Leverage ratio. How many times bigger your position is than your own money. At 10x, for example, €1,000 of your money is backing a €10,000 trade.
2. Notional exposure. In the example above, it's €10,000. Profits, losses and most fees are calculated on this number, not on your deposit.
3. Initial margin. The money you post to open the trade. So with 10x leverage, you'd put up a tenth of the position's value.
4. Maintenance margin. Once the trade is open, the platform sets a lower floor that your account has to stay above. Fall below it and the platform can start closing you out.

One important caveat: providers don't all calculate these the same way. Some use tiered margin that rises with position size, some quote margin as a percentage and others as a ratio. The product's own documentation is the only reliable reference.

Leverage in Spot Margin, Futures and CFDs

Spot margin, futures and contracts for difference (CFDs) can all give you crypto leverage. How they do it varies quite a lot, as the table shows.

Access and protections depend on three things: the provider, the instrument and where you live. For example, a retail CFD from a firm regulated in Spain and a perpetual contract on an offshore exchange might both follow Bitcoin. The rules protecting you on each one are completely different.

A Simple 1x, 5x and 10x Comparison

Here's the same €1,000 of capital at three levels of leverage, with the market moving 5% either way. Fees are ignored for now.

At 10x, a 5% dip halves the account. If the platform's maintenance margin sits at 5% of the position, as it does on some venues, that same dip puts the trade right at the liquidation line.

Real liquidation mechanics are messier than this table. Fees, funding, mark price calculations and tiered margin all shift the exact point, usually closer rather than further away.

Why Percentage Losses on Capital Accelerate

The relationship is simple multiplication. Take the market move, multiply by the leverage ratio, and you get the approximate change on your capital before costs.

A 2% move at 20x is a 40% hit. A 10% move at 10x wipes out the full margin.

Leverage doesn't make Bitcoin more volatile. What changes is how hard each price swing lands on your account.

A 5% daily swing in Bitcoin is pretty routine, and plenty of people who hold it outright wouldn't even open the app. Put the same swing on a 10x position and it can be enough to end the trade.

How Liquidation Works

In plain terms, liquidation means the platform shuts your position for you. It happens when losses have eaten so far into your margin that what's left can't meet the maintenance requirement.

Most venues watch a mark price rather than the last traded price. The mark price is built mainly from an index of spot prices across several exchanges, so a single odd trade on one venue doesn't trigger a wave of closures. Binance uses mark price to calculate both unrealised losses and liquidation levels.

Once your margin crosses that line, software called a liquidation engine starts closing the position. There's no phone call and usually no grace period.

Rules differ by venue. Some examples, current at the time of writing:

• Kraken's EEA (European Economic Area) derivatives can partially liquidate a position until equity is back above maintenance margin, or fully liquidate if it falls further. Kraken states plainly that it doesn't offer margin calls or warnings.
• Robinhood's EU perpetual futures set maintenance margin at 10% of position value, with a full close-out at 5% and a 0.05% liquidation fee.
• Binance first tries to reduce the position with a single large order and stops if the remaining margin is sufficient.

Every threshold here belongs to that specific product, and none of them carries over automatically to another venue.

Stop-Loss vs Liquidation

In leveraged trading, a stop-loss is your exit. You pick the price, and when the market reaches it, an order goes in to close the trade.

Liquidation is the platform's exit. It fires when your margin runs out, whether you've planned for it or not.

A stop set well above the liquidation price is a buffer, but not a guarantee. In a fast move, price can gap straight past a stop level. The order then fills at whatever the market offers, which may be much lower, or on the way to the liquidation level itself.

Neither price can be worked out from the leverage ratio alone. Fees, funding, tiered margin and mark price all move the real liquidation point.

Why the Liquidation Price Is Not the Only Leverage Risk

The liquidation price on the screen is an estimate. Kraken's own documentation says it "should not be taken as static". Several things quietly move it closer.

Funding payments. Perpetual futures have no expiry date, so a periodic payment between longs and shorts keeps the contract near the spot price. Binance settles funding every eight hours by default and can switch to hourly in volatile markets. Kraken's EEA perpetuals settle hourly. Each payment is calculated on the full position size, not your deposit.

1. Trading fees. Opening and closing both cost money, and they're charged on notional value too.
2. Spread and slippage. In thin or fast markets, orders fill away from the displayed price.
3. Price gaps. Crypto trades around the clock, but liquidity doesn't. A sudden drop can skip whole price levels.
4. Collateral value. If your margin is held in crypto, a falling price shrinks the margin itself.
5. Platform rules. Tier changes, leverage caps and contract adjustments can all shift requirements mid-trade.

Each one trims the margin a little. Together, they can bring liquidation forward.

What Can Happen During and After Liquidation

What follows a liquidation depends entirely on the product's rules. Below are the main ones you'll come across, though a given venue might use only two or three.

Partial liquidation

Some platforms close only part of the position to restore margin. You keep a smaller trade, and a smaller balance.

Liquidation fees

Most venues charge a fee on liquidated positions. On Binance, a "Liquidation Clearance Fee" comes out of whatever margin remains.

Insurance funds

If a position closes at a worse price than the trader's margin can cover, some exchanges use an insurance fund to absorb the shortfall. During the October 2025 crash, Binance drew around $188 million from one of its insurance funds.

Auto-deleveraging (ADL)

When an insurance fund can't cover losses, some venues close profitable positions on the other side of the market to balance the books. So yes, even traders who were right can be closed out.

Negative balances

Regulated EU retail CFDs include negative balance protection, and Kraken says its EEA derivatives accounts can't go negative. Other products may treat a shortfall as a debt.

Cross Margin vs Isolated Margin

The margin mode decides how much of your money is actually on the line for each trade.

Isolated margin limits the damage a single position can do. It doesn't remove the leverage risk inside that position. A 10x isolated trade can still lose all of its margin on a roughly 10% move, and often before that point.

Cross margin can survive swings that would liquidate an isolated trade. The flip side is that a losing trade quietly draws on the rest of the account while it does.

Collateral Risk and Changing Effective Leverage

Effective leverage is your position size divided by the margin you actually have right now. It can drift upward even if you never touch the trade.

Losses shrink margin. Funding payments and fees do too. And if the collateral itself is crypto, its price can fall at the same moment the trade goes wrong.

Here's a hypothetical: A trader posts 0.02 BTC as collateral, worth €2,000 with Bitcoin at €100,000, and opens a €10,000 long on Bitcoin. That's 5x.

Bitcoin falls 10%. The position loses €1,000. The collateral is now worth €1,800. Total equity drops to €800 against a position worth €9,000.

Without any action from the trader, effective leverage has jumped from 5x to about 11x.

At a 15% fall, equity is €200 and effective leverage passes 40x. This is sometimes called wrong-way risk: the collateral and the position lose value together.

Stablecoin collateral isn't automatically immune. In October 2025, the synthetic dollar USDe briefly traded at around $0.65 on Binance, pulling down the margin value of anyone using it.

Worked Scenario: A Volatile Move and Forced Exit

Here is one hypothetical trade, followed from opening to liquidation. Every figure is an assumption for illustration, not a live product's formula.

Assumptions: Bitcoin at €100,000. €2,000 initial margin at 10x. Maintenance margin 5% of position value. 0.05% trading fee. Funding at 0.01% every eight hours for three days. A 0.5% liquidation fee.

A 5.7% fall in Bitcoin cost this trader about €1,262, or 63% of the deposit. Costs moved the liquidation point before the market even did anything.

For comparison, a stop-loss at €97,000 that filled cleanly would have cost about €638. The difference is the value of a planned exit, assuming the market lets it execute.

Leverage Rules for Retail Clients in Spain and the EU

Now to the rules. Back in 2018, ESMA (European Securities and Markets Authority) put a ceiling on the leverage EU brokers could offer retail clients on CFDs. Those product intervention measures were temporary, so national regulators later copied them into their own rulebooks.

For crypto, the ceiling is 2:1. Put another way, a retail trader has to post at least half the position's value as initial margin.

The same rules require a margin close-out once account funds fall to 50% of the initial margin posted, negative balance protection per account, and a risk warning showing the share of retail accounts that lose money.

Spain's version arrived in 2019 from the CNMV (Comisión Nacional del Mercado de Valores), the country's securities regulator.

A 2023 resolution added something more unusual. Since August that year, firms have been barred from advertising CFDs to retail clients in Spain, with narrow exceptions such as information a client asks for directly. Foreign firms selling into Spain are covered by the ban too.

Perpetual contracts came up in February 2026. On the 24th, ESMA published a public statement warning firms that selling a product as "perpetual futures" doesn't keep it out of the CFD rules. In ESMA's words, the commercial name "is irrelevant".

How that plays out is still developing. At the time of writing, some EU-licensed venues still list crypto perpetuals at up to 10x for EEA clients.

The bigger distinction is between regulated and offshore. A CFD from an EU-authorised firm comes with these protections. A perpetual contract on an exchange outside the EU framework may offer 50x crypto leverage or more, with none of them.

Why Leverage Risk Is Especially Demanding for Beginners

Leveraged trading moves faster than holding spot. A normal day for a Bitcoin holder can decide a leveraged position in minutes.

• The path matters too. A price can end the week where it started and still liquidate you on the way, because the engine only cares about the lowest point your margin reached.
• Then there's monitoring. Crypto markets run through the night and over weekends, and a position can be liquidated at 3am on a Sunday as easily as at lunchtime.
• The mechanics take some learning, too. Order types, margin modes and funding schedules all have to be right under time pressure.

And watching a position swing by 30% in an afternoon is stressful. Stress tends to produce rushed decisions, like adding margin to a losing trade or removing a stop at the wrong moment.

Experience helps with the mechanics. It doesn't remove the underlying leverage risk. Professional traders get liquidated as well.

When Leverage Does Not Fit the Situation

Some situations make leveraged trading a poor fit, whatever the market is doing.

1. If losing the full margin would cause real financial difficulty, the risk is already too big. The same goes for money set aside for rent, bills or other living costs.
2. If the liquidation rules for a product aren't clear, including how fees, funding and mark price work, the real risk can't be measured.
3. Trading without a tested plan for entry, exit and position size leaves decisions to the moment. And a leveraged position that can't be monitored is running on hope.

Lower leverage reduces the pace of losses. It doesn't remove market risk. A 2x position still loses 20% on a 10% fall.

Conclusion: Exposure Matters More Than the Deposit

The deposit is what you put in. The exposure is what's actually at risk. Leverage risk lives in the gap between those two numbers, and the market only ever sees the bigger one.

Margin sets how much room there is before liquidation. Fees, funding, collateral values and platform rules all shrink that room over time, often faster than expected.

Understanding crypto leverage comes down to knowing the real notional size, the real liquidation terms and the protections that apply where you live. Those details live in each product's disclosures and in your local regulator's rules, and they're worth reading before considering any leveraged instrument.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

An altcoin, or an alternative coin, is simply any other crypto other than Bitcoin. While its meaning is simple, altcoins have developed a reputation for their "mooning abilities." They combine rapid price moves with incredibly thin liquidity, wide spreads, and concentrated ownership. 

While crypto traders often share ideas for the next altcoins to buy them their next imaginary yacht, the reality of trading these incredibly volatile assets is harder than it looks. Entry may be easy, but the combination of volatility and thin liquidity makes getting out a real struggle.

But not altcoins drink from this cocktail. So, understanding altcoin trading risks starts with acknowledging this massive spectrum.

Why Altcoins Differ So Much 

While the term 'altcoin' is mostly used for every non-Bitcoin digital asset, there are currently 10,000+ active altcoins, and they are not all built the same. 

Altcoins differ wildly in market size, the platforms they trade on, and their foundational token design. Some have vast, decentralised networks of nodes. Others run on a handful of servers controlled by a single team.

Circulating supply, actual utility, and governance structures also change the risk profile entirely. A token used strictly to pay transaction fees on a busy network behaves differently than a governance token with no real-world application.

Treating all altcoins as identical financial instruments is a surefire way to miscalculate your exposure. You have to look under the hood of each specific project.

The Trading Pair and Venue Change the Risk 

Trading the exact same token can be a completely different experience depending on what you are trading it against. Compare trading a token against euros versus a stablecoin, or even against another cryptoasset like Ethereum. 

Your quote-asset risk changes dramatically. If you trade an altcoin against Ethereum, you are suddenly exposed to the price movements of both assets simultaneously. The venue matters just as much as the asset. 

Liquidity isn't a global pool, it represents several smaller pools across different exchanges. Fragmented liquidity means the price on Exchange A might not match Exchange B. Furthermore, different venues have wildly different withdrawal rules, custody conditions, and downtime histories.

Low Liquidity Is More Than Low Volume 

People often confuse low volume with low liquidity, but the two are not exactly interchangeable. Liquidity encompasses the spread, the depth of the order book, typical order sizes, and the overall turnover of the asset. Crucially, it defines your ability to trade without moving the price against yourself. 

On the other hand, reported volume can be highly misleading. Across various venues, reported figures might be incomplete, inflated, or entirely unreliable due to wash trading.

When you encounter low liquidity, it means the market cannot absorb significant buys or sells. A token might show millions in "daily volume," yet a simple $5,000 market order could crash the price locally.

Market Capitalisation Does Not Equal Tradable Liquidity 

A massive market capitalisation looks impressive on paper. However, a large reported market value can easily coexist with a shallow order book and limited circulating supply.

For example, if I create an altcoin with 1,000,000,000 tokens but only let 1,000,000 circulate, the market cap might look huge if that one million trades at a high price. But the actual tradable liquidity is practically non-existent. Here's how it plays out in reality.

How Thin Order Books Create Slippage 

When you place a market order to buy or sell an altcoin, you are essentially telling the exchange: "Give me this token right now, at whatever the best available prices happen to be." If the order book is thin, your order will eat through the first price level and enter the next price level. Hence, the term, slippage. 

This painful difference between your expected price and your actual filled price is known as slippage. Imagine you want to buy 1,000 tokens of "Token X". The quoted price flashing on your screen is $1.00. But here is what the sell side of the order book actually looks like:

• 200 tokens available at $1.00
• 300 tokens available at $1.05
• 500 tokens available at $1.15

So, when you click buy, you're not getting 1,000 tokens at $1.00. Instead, you get 200 tokens for $200, 300 for $315, and 500 for $575. Your total cost is $1,090. Your average fill price is $1.09, completely disconnected from the $1.00 you initially saw.

That 9% hit is raw slippage. In the world of altcoin trading, where prices can move very quickly, if the order book is thin, it will eat into your capital incredibly fast if you aren't paying attention.

Why Price Moves Can Be Violent 

The crypto market as a whole is almost synonymous with volatility at this point. While it's a trait with cryptos, the price movement (both rise and drop) of smaller altcoins tends to be more violent than other altcoins. Why?

The extreme crypto volatility we see in smaller altcoins is usually the mathematical result of low depth combined with sudden market catalysts. Concentrated holdings mean that if just one early investor decides to exit, the entire order book can be nearly wiped out. 

Also, automated liquidations in leveraged markets can force-sell assets regardless of the underlying demand, driving prices into the ground. The reason that triggers the violent price move can be a surprise exchange listing, sudden token unlocks, unverified news, or outright market manipulation.

Primary sources like blockchain analytics firms often share the main reason why certain altcoins are more volatile. The 40% daily drop is often more than "market sentiment." Analytics firms often post large whale cashing out, which sparks a massive drop for some altcoins.

Token Unlocks and Changes in Circulating Supply 

Many altcoins launch with a fraction of their total supply in circulation. The rest is locked up for the team, early investors, and future emissions. Understanding vesting schedules and scheduled unlocks is non-negotiable in altcoin trading. 

When locked tokens are finally released into the market, the available supply instantly inflates. If you don't track this, you are flying blind. For any concrete example, you must refer to the primary token documents and a dated release schedule.

If a project's whitepaper states that 10% of the total supply unlocks on the 15th of next month, you should expect downward pressure on the price around that date. The math is simple: more supply meeting the same demand lowers the unit price.

Common Errors in Altcoin Trading 

Because of how unique the crypto space is, traders coming from trading traditional assets often carry over ingrained habits. While your strategy might still work, approaching crypto like traditional finance is one mistake that often backfires. So, here are some of the common errors people make in altcoin trading. 

• The most glaring error in altcoin trading is opening a market order without taking two seconds to glance at the order book depth. Because of the sheer number of altcoins, you need to verify the order book depth before jumping in.
• Another incredibly common mistake is sizing a position based solely on the displayed quote price. If you buy big, you'll likely push the price up. If you sell big, you push it down in a thin market.
• People also frequently ignore the specific venue and trading pair, assuming prices are perfectly harmonised across the globe. 
• Lastly, never assume a stop-loss order magically guarantees your exit at that exact price, and please, don't confuse an altcoin with a low unit price (like $0.00001) for a mathematically "cheap" valuation.

Leverage in an Illiquid Altcoin Market 

Adding leverage to any altcoin that naturally suffers from high crypto volatility is a distinctly risky choice. Adding it to an illiquid order book is outright dangerous. When you are heavily leveraged, a surprisingly small price drop can trigger an automated margin call. 

If the exchange liquidates your position, it fires off a forced market order. If the order book is thin, that automated sell order will suffer massive slippage, widening the bid-ask spread even further, and driving the price down harder. 

This dynamic can instantly trigger other people's liquidations, creating a vicious domino effect. Lowering your leverage from 10x to 3x does not protect you if the market simply cannot physically absorb your exit. 

If the bids aren't sitting there on the book, liquidity risk remains absolute, completely regardless of how conservative your margin ratio feels.

Market Capitalisation, Supply and Concentration 

To be able to choose the right altcoin to trade to minimise your trading risk, you must differentiate between circulating supply and maximum supply. The Fully Diluted Valuation (FDV) calculates the market cap as if every single token that will ever exist is already in circulation. 

A massive gap between current market cap and FDV is a glaring red flag for future inflation. Holder concentration is another critical metric. If three wallets hold 80% of the circulating supply, they control the market entirely.

However, interpreting on-chain holder lists requires details. The largest holder might actually be a centralised exchange's cold wallet or a smart contract holding liquidity for a decentralised exchange. You have to verify who actually controls those addresses.

Concentration, Manipulation and Conflicted Information 

Where an altcoin has concentration of large holders in its market, the risk of manipulation follows closely. Large holders can coordinate to make the altcoin look more active than it is. This is referred to as wash trading - where entities simultaneously buy and sell to themselves to create fake volume.

Wash trading is very popular among smaller altcoins, as they use it to lure in unsuspecting investors. This artificially tightens the bid-ask spread on paper, luring in unsuspecting retail participants.

We also see coordinated promotions and undisclosed financial incentives. Influencers might be paid in the very tokens they are promoting, needing retail liquidity to act as their exit strategy.

Always separate verifiable on-chain ownership data from unproven allegations about a team's intent. The blockchain tells you exactly where the tokens are; human psychology tells you what they might do with them.

Execution Choices in a Thin Market 

When the market is thin, how you execute your trade is just as important as what you trade. Market orders guarantee speed but surrender control over the price, exposing you to massive slippage. 

Limit orders allow you to set your exact price, but they introduce cancellation risk, your order might simply never fill. Execution Trade-offs:

• Market Orders: You get the tokens now, but at the mercy of the order book.
• Limit Orders: You protect your price, but risk missing the trade entirely.
• Partial Fills: In thin markets, a limit order might only partially fill, leaving you holding half the position you intended.

Do not fall into the trap of thinking a limit order eliminates all loss. It merely dictates your entry or exit point; it does not guarantee the market will ever reach it. Managing liquidity risk means understanding these mechanical trade-offs.

Listings, Delistings and Fragmented Markets 

The lifecycle of most altcoins heavily features venue hopping. When a small token gets a surprise listing on a major, top-tier exchange, the sudden access to a global user base temporarily spikes both volume and crypto volatility.

Conversely, a delisting announcement can destroy an asset overnight. When a venue removes a token, it radically reduces the available exit routes for holders. Always require dated venue announcements before trading on listing news. 

For example, if an exchange posts a delisting notice for October 15th, liquidity will evaporate long before that date. Avoid assuming that prices will neatly converge across different, fragmented markets during these chaotic events.

Worked Scenario: Entry Looks Easy, Exit Does Not 

Let's walk through a hypothetical small-cap token scenario, Kilonova. You see it trending with a gain of 150% over the last two days and decide to invest $10,000. The entry looks effortless, with a promising future. 

You place your buy, the bid-ask spread is tight, and you secure your position. A week later, bad news hits. You want out immediately. You check the book, and the best bid is $2.00, but there are only $500 worth of bids at that level. 

The next bid steps down steeply to $1.80, $1.50, and $1.00. If you hit market sell to exit your $10,000 position, you will burn through all those levels. Your realised result, after paying trading fees and enduring brutal slippage, might only be $6,500.

This isn't typical for every asset, but this specific sequence encapsulates one of the most dangerous altcoin trading risks. The door in was wide; the door out was a keyhole.

Operational and Regulatory Risks 

Beyond the mechanics of the order book, altcoin trading consistently exposes you to a wide host of structural and operational threats. Trading venues routinely suffer complete outages right when market crypto volatility fiercely spikes. 

Blockchain networks can become so intensely congested that your supposedly instant transfer gets stuck in digital limbo for hours. There are also severe smart contract vulnerabilities to consider; a single, well-executed exploit can drain a liquidity pool instantly, dropping the token price to zero in an instant. 

Regulators across the EU, such as the European Securities and Markets Authority (ESMA), constantly and loudly highlight these systemic altcoin trading risks. Under upcoming operational frameworks like MiCA (Markets in Crypto-Assets), there are finally clearer lines being drawn between regulated services and the unregulated wild west.

However, keep in mind that even using a fully regulated broker does not shield you from the intrinsic, fundamental risk of a highly volatile altcoin going to zero.

When the Trade Does Not Fit

You may have a strategy with a high win rate and a perfect set-up to execute, but sometimes, the smartest, most profitable move will be to simply walk away from trading an altcoin. 

If you cannot accurately verify the market depth of an altcoin, or if the token is entirely dependent on a single, highly obscure exchange, the structural risk might simply be far too high to justify the trade.

If you can't find clear, reliable data on the token's actual circulating supply, you are flying completely blind. More importantly, if you cannot truly afford the potential loss, or if you realistically might need immediate, frictionless access to your funds in fiat currency, engaging with altcoins chronically suffering from low liquidity is a stark mistake. 

Keep your internal decision-making completely neutral and focused strictly on the cold mechanics of the trade. Navigating the world of altcoins is ultimately an ongoing exercise in managing market friction.

Conclusion: Check the Exit Before the Entry 

When it comes to trading altcoins, the underlying challenge isn't just picking the right altcoin with the best technology; it's about mastering the deeply connected web of liquidity risk, token concentration, and execution mechanics.

High crypto volatility can easily make you look like an absolute genius on paper, but a massive bid-ask spread and punishing slippage will quickly and aggressively humble you when you actually try to realise those paper gains.

Always remember the singular, golden rule of navigating altcoin trading risks: the quoted price flashing on the screen matters a whole lot less if your intended order simply cannot be filled anywhere near it. Always meticulously plan your exit before you ever decide to click buy.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

Every investment comes with a pitch. Some are loud, some are polished, and plenty are perfectly honest. None of them are a risk assessment.

If you want to know how to assess investment risk properly, five questions do most of the work. What could cause a loss? How big could that loss get? When can you actually get your money back? Who owes you, or holds the assets for you? And which dated, independent documents back all of this up?

Marketing can introduce a product. Answering those questions takes the paperwork behind it.

Separate the Product From the Promise

Investment marketing claims tend to lean on a small set of comforting words. "Stable." "Protected." "Passive income." "Institutional-grade." "Low risk." In crypto, add "fully backed" and "real yield."

None of these words is a red flag on its own. Plenty of well-run funds describe themselves this way, and often they're right to. Each word works better as an opening line, with the detail still to come.

Asking this doesn't assume bad faith. It turns an adjective into something you can check, which is the whole point of an investment risk assessment.

Start With the Loss Mechanism

Learning how to assess investment risk starts with one plain question: how, specifically, could money be lost? There's usually more than one route.

Market risk is the most familiar investment risk: prices fall. Credit and default risk is about a borrower or issuer failing to pay. Leverage and currency can magnify either. Concentration means too much riding on one company, sector or token.

Then there are the quieter paths. Liquidity risk is being unable to sell when you want to. Custody and operational risk covers hacks, errors and platform failures. Regulatory risk is the rules changing underneath a product. Crypto adds its own entries, such as a stablecoin losing its peg or a smart contract being exploited.

For each relevant path, it helps to picture two outcomes. First, an ordinary bad year: prices down 15%, income lower than hoped. Second, an extreme but plausible one.

Take Terra's UST, which was built to hold $1 and managed it for a good while. On 9 May 2022 it was trading at around 60 cents. A week later, what was left was a small fraction of that. Holders who'd been told it was stable found out what the mechanism behind the word actually was.

Match Product Risk With Horizon, Liquidity Needs and Loss Capacity

The same investment product risk can mean very different things to different people. A 20% fall is a nuisance if the money isn't needed for ten years. It's a real problem if that money is next spring's house deposit.

Two personal factors shape this. Time horizon is when the money will be needed. Loss capacity is how much of a fall could be absorbed without changing plans.

Risk and return are linked, but the link only helps if you can wait for the return to show up. A product that tends to recover over five years offers little comfort to someone who has to sell in five months. This isn't about labelling any product as right or wrong for a type of investor. It's about noticing that the risk on paper and the risk in your own situation can differ.

Understand What You Legally Own

"Buying" an investment can mean owning quite different things.

A share is part-ownership of a company. A fund unit is a slice of a pooled portfolio, usually held by a separate depositary. A bond or note is a debt claim: you're owed money by an issuer, and you rely on them to pay. Some crypto exchange-traded products (ETPs) work this way too, as notes backed by crypto rather than direct ownership of the coins. A derivative is a contract whose value depends on something else, and on the other party honouring it.

Crypto adds more layers. Tokens in your own wallet are held directly. Tokens on a platform may be held for you as a beneficial interest, or may only give you a contractual claim against the platform. The terms decide which. Once tokens are lent out or staked through a third party, ownership can quietly turn into an IOU.

The legal documents tell you which one you have: the prospectus, the key information document (KID), the terms and conditions or, for crypto-assets, the white paper required under MiCA (the EU's Markets in Crypto-Assets Regulation). Until you've read the relevant section for the specific product, it's best not to assume either ownership or protection.

Check Liquidity and Exit Conditions

Liquidity is about how, when and at what cost you can leave.

Some funds deal daily, others weekly or monthly. Exchange-traded products only trade when their exchange is open. Some products have lock-ups, notice periods or redemption gates, which let a manager limit withdrawals when too many people want out at once.

Then there's the price. A bid-ask spread is the gap between buying and selling prices. Market depth is how much can be sold before the price moves against you. In a thin market, a large sale can land well below the price on screen.

There's a big difference between being able to request an exit and being able to exit near the displayed price.

That gap is liquidity risk in practice. Crypto may trade 24/7, but that's cold comfort when the platform holding your coins decides nobody's leaving. Celsius customers found this out on 12 June 2022 (about 1.7 million of them), and the lender was in bankruptcy court by mid-July.

Read the Risk Indicator With Its Assumptions

Most packaged investments sold to retail investors in the EU have to publish a KID. That's thanks to the PRIIPs (Packaged Retail and Insurance-based Investment Products) Regulation, and since the start of 2023 it's applied to UCITS funds too (the format most European funds use). On the first page there's a little row of boxes numbered 1 to 7. That's the summary risk indicator, or SRI.

The SRI combines two things: how much the price has tended to move (market risk) and how likely the provider is to be unable to pay (credit risk). The higher of the two sets the score.

The SRI always comes with a holding-period assumption. A typical KID says something like: "The risk indicator assumes you keep the product for 5 years. The actual risk can vary significantly if you cash in at an early stage."

A low score doesn't mean no risk. The indicator is a tool for comparing investment product risk across products, and KIDs themselves point out what it leaves out. Currency risk, for example, is usually "not considered in the indicator". Liquidity and concentration aren't captured well either.

What if there's no KID? Crypto ETPs sold to EU retail investors usually have one. One bitcoin exchange-traded note on the market, for example, is rated 6 out of 7 rather than 7. Most crypto-assets bought directly don't have a KID at all. The nearest equivalent is the MiCA white paper, where one exists, which describes the asset and its risks but has no standardised risk indicator.

Review Performance Scenarios and Stress Assumptions

KIDs also show four performance scenarios: favourable, moderate, unfavourable and stress. Under the current rules, the first three are illustrations based on the best, average and worst performance of the product or a suitable benchmark over the last ten years. The stress scenario shows what might happen in extreme market conditions.

What KID performance scenarios look like: an illustrative example (€10,000 invested)

These are useful for getting a sense of the range of risk and return outcomes. They aren't forecasts, and KIDs say so directly: "Markets could develop very differently in the future."

A few things are worth checking. What holding period are the scenarios based on? Do the figures include all costs, or only the product's own? Is the history the product's own, or a benchmark's? And when was the KID produced? A KID from 18 months ago reflects the market of 18 months ago.

How Fees, Leverage and Currency Can Magnify Risk

Costs, borrowing and currency are rarely the main investment risk on their own. What they do is make a loss bigger.

To see how this stacks up, picture €10,000 put into something priced in US dollars, which then drops 10% in a year. Annual costs are 1.5% of the amount invested. Leverage, where used, is 2× with borrowing at 5% a year. Currency effect is the dollar falling 5% against the euro.

The asset only fell 10%. The investor lost 37%.

Currency can work the other way, of course, and a rising dollar would have softened the fall. The point is that it adds a second moving part. In 2025, the euro rose roughly 14% against the dollar, which cut about 12% off the euro value of a dollar holding that didn't move at all.

Leverage changes the balance of risk and return in both directions, so it deserves particular care. EU regulators found that 74–89% of retail accounts trading contracts for difference (CFDs), a common leveraged product, lost money. That's why leverage on crypto CFDs for retail clients is capped at 2:1.

Verify the Provider, Custody and Counterparties

A logo on a website proves very little. Checking the official registers costs nothing and usually takes a couple of minutes.

In Spain, that means the CNMV (Comisión Nacional del Mercado de Valores), whose website has a search for authorised firms and a separate page of warnings about firms that aren't. For crypto, there's a second stop. ESMA, the EU's markets watchdog, runs an interim MiCA register, which is really a handful of downloadable lists: approved crypto-asset service providers (CASPs), filed white papers, and firms that have been flagged as non-compliant. Spain's transition period ended on 1 July 2026, so crypto platforms serving Spanish clients now need MiCA authorisation.

Registration deals with one investment risk: handing money to a firm that isn't allowed to take it. Counterparty risk is the other side. Who is the legal entity you contract with? Who holds the assets, and are they kept separate from the provider's own? Who pays you if things go wrong? Are there conflicts, such as a platform lending out client assets to earn its own returns?

Spain has two guarantee schemes. The FGD covers bank deposits, plus securities held with banks as a separate guarantee. FOGAIN covers investments held with member investment firms. Each guarantee goes up to €100,000 per person. FOGAIN is clear about its limits. It doesn't cover market losses, and it doesn't cover the failure of an issuer.

Compare Claims With Disclosures and Numbers

This is where the pitch and the paperwork meet, and where an investment risk assessment gets concrete. The table below pairs common investment marketing claims with where to check them.

A marketing claim that holds up across every column is a strong claim. One that goes quiet in a column is telling you where to look harder. Good risk disclosure fills the gaps. Weak risk disclosure leaves them open.

A Worked Product-Risk Scenario

Here's a hypothetical product: "Earn 8% stable income on US dollar stablecoins."

Tracing each layer shows how investment product risk builds up. Picture €10,000 converted into a dollar stablecoin at an exchange rate of 1.17, with a 1% spread on the way in and out. Deposits need 30 days' notice to withdraw.

• Price. Even the big, well-established stablecoins can wobble. USDC dipped below 87 cents over one weekend in March 2023, after Circle revealed that $3.3 billion of its reserves were stuck at the collapsed Silicon Valley Bank. It recovered, but not everyone holds through the gap.
• Issuer. Under MiCA, holders of e-money tokens have a right to redeem at par with the issuer. That right depends on the issuer's reserves and on the token actually being authorised in the EU.
• Platform. The 8% has to come from somewhere, usually lending to traders or other borrowers. EU rules restrict interest on e-money tokens, so it's fair to ask which entity pays the 8%, from what activity, and under which authorisation. That entity is the counterparty risk.
• Liquidity. Thirty days' notice means thirty days of exposure after deciding to leave.
• Currency and fees. Say the euro strengthens over the year, from 1.17 dollars to 1.25. Take off the spreads and the "8%" turns into about €9,910. In euros, that's a small loss of around 1%.

Now add time. If the money is needed in three months and the same currency move happens, the result is closer to −6.5%, with notice periods making the timing tighter. Over five years, currency swings have more time to even out, but issuer and platform exposure run for five years too. Nothing here makes the product suitable or unsuitable. It shows how the same product can lead to different conclusions depending on the investor's timeline.

Red Flags and Important Exceptions

Some warning signs come up again and again in regulator guidance:

• Urgency: "offer closes tonight", "only 20 places left"
• Guaranteed high returns, or returns with "no risk"
• A vague or missing legal entity, or one based far from its customers
• No verifiable documents, or documents that don't match the marketing
• Pressure to skip independent research, keep it quiet, or trust that "everyone is buying"

Crypto adds its own. A "guaranteed APY" (annual percentage yield) on a volatile token is one. A platform missing from the ESMA register is another. MiCA requires crypto marketing to be fair, clear and not misleading, and consistent with the white paper, so a gap between the two is worth noticing.

Now the exception. A regulated provider and clear risk disclosure do reduce some risks. They make fraud harder, set rules on custody, and give you somewhere to complain. What they don't do is guarantee performance. A fully authorised product can still fall in value, and many do.

When Professional Help May Be Appropriate

Knowing how to assess investment risk yourself goes a long way. Some situations are still worth a second opinion. Complex structures, leverage, large amounts relative to total savings, documents that stay unclear after a careful read, and tax questions all come into that category.

In Spain, investment advisers and firms offering advice should appear on the CNMV's register. Tax treatment of investments, crypto included, depends on personal circumstances and Spanish rules, and it can change. A registered adviser or tax professional can look at the specifics in a way no general guide can.

Conclusion: A Risk Claim Is Only as Strong as Its Conditions

"Low risk" is a conclusion. The useful part is the reasoning behind it.

A proper investment risk assessment pulls the threads together: how money could be lost, what you legally own, how and when you can get out, who stands between you and your assets, what costs and currency do to the result, and when you'll actually need the money. A risk indicator helps. A marketing adjective starts the conversation.

Neither one finishes it, and that's true of investment marketing claims generally. Knowing how to assess investment risk mostly comes down to asking what has to be true for the claim to hold, and then checking whether it is.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

If you’ve been around crypto for a while, you’ve probably heard of Bitget, one of the world’s major crypto exchanges. And well... last week, it found itself facing the biggest crypto hack of the year, with around $388 million stolen from part of its hot and warm wallets.

While Bitget was quick to respond and assured that user balances were unaffected, investigators have since uncovered more details about how the attack unfolded, with signs that this attack's seeds have been planted inside the infrastructure weeks before making the big move.

So, let’s see what investigators found out.

The attack may have started weeks before

September 24 may have been the day everyone noticed the attack, but according to an investigation by security firm SlowMist, the earliest known activity linked to this incident dates back to August 31.

Investigators believe the attacker exploited a zero-day vulnerability in a third-party security product and later gained access to other security systems. The investigation also uncovered activity involving another security product and a wallet application host, suggesting that the attacker may have spent considerable time moving through Bitget’s infrastructure before attempting to steal the funds.

Things get even more interesting when you look at the tools involved. SlowMist says it recovered a deleted, highly customised tool designed specifically to manipulate Bitget’s withdrawal process, allowing to forge risk-control information, construct withdrawal requests and trigger the withdrawal process.

In other words, this wasn’t someone simply finding an exposed wallet and simply moving funds. It rather seems that the attacker have carefully worked their way through the infrastructure before the real deal.

The heist’s kickoff and emergency mode

Bitget has been pretty transparent about what happened, and its systems quickly reacted to the attack. That’s what years of operating seriously in the crypto ecosystem can bring.

The first unauthorised transfers occurred at 18:31 UTC on September 24, involving assets held across part of Bitget’s hot and warm wallet infrastructure. And just 34 minutes later, Bitget’s reconciliation system detected a major discrepancy and automatically blocked withdrawals across the platform.

At 19:14, its highest-level emergency response was activated, followed by the isolation of affected systems and the shutdown of withdrawal-related services, while the company began moving funds to cold wallets as a precaution and investigated whether private keys could have been compromised.

By the next morning, Bitget said it had identified the attack path and started fixing the underlying vulnerability. The exchange platform then began gradually restoring withdrawals from September 28, starting with BTC and subsequently reopening other assets and networks following additional security checks.

According to Bitget, the incident was limited to a portion of its hot and warm wallet infrastructure and no cold wallets were affected, private-key compromise was ruled out based on the investigation, and user account balances remained unaffected.

The company also said that the financial impact was covered by its Protection Fund. And yeah, $388 million is certainly not a small amount to cover, but they did.

Who’s behind it?

This part is still a “case open” situation. Bitget and several blockchain investigators have pointed to a possible North Korean connection, based on infrastructure, IP addresses and patterns resembling previous attacks attributed to North Korean hacking groups like the Lazarus Group.

The potential connection is particularly notable because North Korean-linked groups have previously been associated with some of the largest crypto thefts in the industry. However, that doesn’t mean this Bitget attack is their work.

At this stage, the connection has not been officially confirmed by a government, and Bitget says it won’t speculate on attribution until the investigation is complete. Independent investigations by firms including SlowMist and Mandiant are helping piece together what happened, but the full picture is still to be assembled.

Where is the money now?

As you can imagine, the attacker hasn’t left the $388 million sitting in one wallet waiting for someone to find it.

Once the funds were stolen, they began moving across different blockchains and through cross-chain swap services to make them difficult to trace and recover. Investigators managed to track back some assets moving through services including THORChain and other cross-chain infrastructure, with the attacker splitting funds into different wallets and converting some assets along the way.

Not every attempt has worked, though. Near Intents says it rejected more than $50 million in attempted swaps linked to the attack, while some funds have also been frozen through cooperation between different players in the crypto ecosystem. Bitget can certainly thank them.

More recently, the attacker took another route. Around $3.9 million in stolen Zcash was moved into Zcash’s privacy-focused Ironwood pool, where transactions are designed to hide the sender, recipient and amount from the public. That makes the funds even harder for investigators to follow while they remain inside the shielded pool.

Blockchain transactions may be public, but following stolen funds across multiple networks, wallets, swaps and privacy systems is a very different challenge. Bitget is working with exchanges, blockchain projects, security firms and law enforcement to track and recover the assets.

The company has also launched a 5% recovery bounty for eligible funds that are frozen or recovered, giving the wider crypto industry an extra incentive to help bring the stolen assets back to Bitget. So, if you’re ready for some hacker hunting, feel free to put on your bounty hunter hat. Yeehaw!

On a side note, after investigating Bybit's $1.5B hack from last year, ZachXBT might have a lead on this Bitget one. Let's keep an eye out for next updates.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

Most new trading platforms attach the colourful “zero commission” banner to attract users. However, zero commission does not mean your next trade is essentially free. The reality of the all-in cost of a trade goes much deeper than a marketing banner. 

It includes a complex web of explicit charges wrapped together with the harsh, invisible gap between your expected and realised prices. A zero-commission label simply means your broker dropped one specific, highly visible line item. It absolutely does not establish that execution is free.

When calculating real trading costs, you must track every penny scraped away from the moment your capital leaves your bank account to the exact second your order finally fills. Your broker is running a business, not a charity.

Explicit Costs You Can Usually Find

The actual cost of trading on most platforms is often hidden deep in fee schedules. These documents are notoriously thick with footnotes.

You will typically encounter a matrix of maker and taker fees, withdrawal charges, network gas, and various funding charges. There might even be a sneaky currency conversion fee if you fund your account with a fiat currency they don’t natively support.

Always check the provider’s live schedule with a recent retrieval date. For instance, as of late 2024, rates and tier structures fluctuate wildly depending on the platform. Make sure you confirm your exact eligibility conditions before depositing a single euro.

Maker, Taker and Fee Tiers

The behaviour of the order in the market will dictate your baseline trading fees. Most trading platforms will reward you by reducing your fees anytime you add depth to the order book (acting as a maker).

On the flip side, they will penalise you by charging higher fees when you remove that depth away from the market (acting as a taker). Your recent trading volume over a rolling 30-day window usually dictates which fee tier you sit in. The higher your volume, the lower the toll you pay.

If your limit order is instantly marketable, meaning its price crosses the spread and immediately matches an existing resting order, it removes liquidity. Consequently, the exchange categorises you as a taker and smacks you with the higher fee anyway.

Deposits, Withdrawals and Currency Conversion

Moving money is rarely a frictionless process. You have to separate the platform charges from the payment-provider costs and the underlying blockchain network fees. For instance, depositing EUR via a SEPA transfer might be completely free on the exchange side. 

However, your local bank could still ding you €15 for processing an international wire transfer. Withdrawing Bitcoin? You will likely pay the exchange’s flat withdrawal fee plus a dynamic network fee reflecting current mempool congestion.

And if you deposit GBP into an account strictly denominated in USD, expect to be hit with a currency conversion fee. Under current standard conditions, these conversions can eat anywhere from 0.5% to 2% of your capital instantly.

The Bid-Ask Spread

Let’s talk about the gap. The bid is the highest price a buyer will currently pay for an asset. The ask is the lowest price a seller will accept. The space wedged between them is known as the spread.

Here is the brutal reality check: you buy at the higher ask price and sell at the lower bid price. Imagine staring at an order book where the bid sits at €100.00 and the ask rests at €100.10. 

The immediate round-trip effect of this gap is devastating to short-term trades. If you buy a share for €100.10 and panic-sell it a microsecond later, you only get €100.00 back. You just lost 10 cents without the asset’s true value moving an inch.

That quoted spread is not a static, reliable number. When liquidity dries up or market volatility suddenly spikes, market makers pull their orders back to protect themselves. As a result, the spread widens aggressively.

One-Way Cost vs. Round-Trip Cost

Placing a trade is only half the battle. Crossing the spread at entry and then doing it all over again at exit dramatically alters your break-even point. Say you buy a token with a nasty 1% spread on the way in. It costs you €1,000 to buy €990 worth of the actual asset.

To merely break even, the asset has to rise more than 1% to cover your initial entry spread. But wait, you also have to cover whatever spread exists when you finally decide to sell. Why might the spread differ between those two moments? 

Market conditions change constantly. You might enter a trade during a calm, highly liquid afternoon session. But if you try to exit during a chaotic flash crash, that spread might have temporarily blown out to 3% or 4%.

Slippage and Execution Quality

Sometimes the price you see on your screen is a complete mirage. Slippage happens when your final fill lands at a noticeably worse price than the quote you clicked. It is crucial to distinguish between three distinct concepts. 

There is the expected price in your head, the quoted price on the screen, and the average fill you actually secure. Market impact is a prime culprit for this disconnect. If you dump a massive order onto the market, it eats through the best available price and chews aggressively into worse bids.

Sometimes you get partial fills. Half your order clears perfectly at the quote, but the rest slides down the order book. Latency delays and rapid price moves during breaking news also cause bad fills. 

However, it is important to remember that not every adverse execution implies broker misconduct; sometimes the market simply moves faster than light.

Order Size, Market Depth and Price Impact

Size matters tremendously in financial markets. The very same asset can feature wildly different execution costs for a casual €100 ticket versus a €10,000 whale order. You must look at the order-book depth, not just the daily trading volume. 

Daily volume is a rearview mirror, telling you what already happened. Order-book depth is the windscreen, showing you exactly what is coming next. If there are only €500 worth of sellers sitting at the current best ask, your €10,000 market buy will bulldoze right past them.

It will cascade up the order book, triggering worse and worse prices until the entire €10,000 is eventually filled. This phenomenon is pure price impact, and it acts as one of the largest hidden trading costs for sizable accounts.

Market, Limit and Stop Orders Change the Trade-Off

How you enter the market dictates your risk profile. Your order type fundamentally changes the trade-off between speed, price certainty, and risk. Here is how the three main types compare:

Remember, order behaviour differs across venues and products. A stop order on one exchange might trigger based on the last traded price, while another triggers based on the index price. Read the manual for your specific venue.

Other Costs That Appear Over Time

Fees don’t just end when you open a position. The longer you hold that position, the more hidden trading costs accumulate quietly beneath the surface. If you regularly trade derivatives or perpetual contracts, funding fees will silently drain or pad your account balance every few hours. 

Borrowing interest for standard margin trades also ticks upward on a daily basis. Some traditional brokers even slap you with inactivity charges if you stop trading for a quarter. And do not forget standard custody fees for simply holding the asset on their infrastructure.

• Taxes: Don’t ignore the taxman. For instance, in Spain (as per 2024 tax regulations), crypto-to-crypto trades are taxable events subject to savings tax rates ranging from 19% to 28%. EU guidelines are continually evolving under MiCA regulations. Always source a localised, certified tax professional.
• Opportunity Cost: Every euro locked up as trading collateral is a euro that cannot earn a safe, predictable yield in a high-interest savings account.

How Leverage Makes Costs More Important

For many traders, leverage is a means of amplifying gains. While leverage amplifies potential profits, it also amplifies potential losses and trading costs. 

Trading fees and funding fees are charged against your notional exposure in many products, not just your posted margin. If you put up €1,000 with 10x leverage, you are paying fees on the full €10,000 position.

This drastically magnifies the effect on your posted capital. A tiny 0.1% fee on €10,000 is €10. That is a full 1% of your actual €1,000 capital gone in an instant. Always verify the exact calculation in the current product documents before cranking up the leverage dial.

All-In Cost Calculation

Let’s build an original, step-by-step worked example to highlight the massive hidden trading costs iceberg. Imagine you want to buy and later sell €1,000 worth of a foreign asset.

Assume you start with your native currency, euros, but need US dollars to access the deepest market. Here is the brutal math of a complete round trip:

• Initial Conversion: A 0.5% currency conversion fee on €1,000 equals a €5.00 cost.
• Entry Fee: A standard 0.2% taker commission on the buy side equals €1.99 (calculated after conversion).
• Entry Spread & Impact: You lose roughly €3.00 to the half-spread and minor slippage upon buying.
• Exit Fee: Another 0.2% taker commission when you eventually sell equals €2.00.
• Exit Spread & Impact: You lose €4.00 on the way out because volatility unexpectedly spiked.
• Return Conversion: Another 0.5% currency conversion fee to get your funds back into euros costs €4.92.

Your total all-in cost for this supposedly simple trade? Roughly €20.91. That means over 2% of your entire capital simply vanished in friction alone.

Why Small and Frequent Trades Feel the Cost More

If you are a scalper who opens a lot of positions, prepare to bleed capital. Fixed minimums, repeated spreads, and compounding friction absolutely destroy small accounts. If an exchange has a fixed €2 minimum commission, a €50 trade takes a massive 4% hit right off the bat. 

If you open 10 positions, you’ll be wiped out in days from just fees. Even without fixed minimums, constantly paying the spread on frequent, small trades compounds your friction using a neutral comparison. 

We won’t claim a universal break-even frequency, because every strategy is different. But the math doesn’t lie. Over-trading makes your broker rich and keeps you poor.

How to Compare Execution Across Providers

To actually compare hidden trading costs across providers, you need completely identical data points. You must compare the exact same asset, at the exact same time, using the identical order type, size, and venue. Look at the initial quote and then check your final execution price.

A harsh warning: screenshots from different moments in time do not prove better execution. Markets move in milliseconds. A screenshot of a tight spread at 10:01 AM tells you absolutely nothing about the spread at 10:02 AM.

When the Estimate Can Be Wrong

The estimated trading cost a platform gives you is just an educated guess. They remain highly fluid ranges until your order actually fills and the dust settles. This is a result of volatile macroeconomic events routinely shattering order books.

When a major inflation report drops, liquidity vanishes almost instantly, and suddenly thin markets gap wildly from one price level to the next. Hidden order-book depth can suddenly appear and absorb your market momentum. 

Severe blockchain network congestion can aggressively spike your gas fees right as you hit the confirm button. You might even unexpectedly drop down a fee tier overnight due to a rolling volume calculation. Ultimately, a quoted execution price is merely a polite suggestion in a deeply chaotic market.

Conclusion: Measure the Full Path of the Trade

Don’t choose a trading platform simply because of its promised headline commission. In many cases, it’s a trap designed for amateurs. To find your true all-in cost, you must measure the full path of the trade. Make a summary of explicit and implicit costs from deposits to trading, closing, and withdrawals. 

You have to account for the spread, the slippage, the conversion fees, and the funding rates. You also need to review live quotes, dig into the boring fee schedules, and audit your actual fills. This is because hidden trading costs can add up quickly, leading to much higher trading costs than advertised.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

If you’ve spent any time at all trading, then you’ve probably come across the term 'open interest' (OI). While it might sound like a complex concept, it is simply the total number of outstanding derivative contracts that remain open at a stated time. 

The OI tells you all the contracts that have not been settled or expired. They show all the live contracts, sitting on the exchange books right now. Every single contract out there fundamentally requires two parties. There must be a buyer, and there must be a seller. 

Therefore, the open interest includes both long and short positions in completely equal measure. Because both sides must exist simultaneously for a contract to be valid, the OI is entirely neutral and cannot tell you the direction of the market. Let’s explore this metric in detail and why it is widely used and quoted by market analysts and traders. 

How Open Interest Changes 

OI changes when traders open new contracts, close existing ones, or transfer positions between each other. When a brand-new buyer and a brand-new seller agree to trade, a new contract is formed. The total count goes up by one. This is what the process looks like:

• [Trader A: Buys to Open] + [Trader B: Sells to Open] = Total Increases (+1)
• [Trader C: Sells to Close] + [Trader D: Buys to Close] = Total Decreases (-1)
• [Trader A: Sells to Close] + [Trader E: Buys to Open] = Total Unchanged (0)

If an existing buyer decides to cash out, they might sell their position to a completely new participant. The contract just changes hands. The total remains exactly the same. Only when two existing participants close or open their trades against each other does the number finally drop/rise.

Open Interest in Futures vs Options 

In traditional markets, futures contracts represent a strict, binding obligation. You agree to buy or sell a specific asset at a set future date. One contract equals one fixed unit of that underlying commodity or financial instrument.

Options, however, operate much differently. They grant you the right, but absolutely no obligation, to make that future trade. Because of this, options OI data can look very fragmented. 

The numbers are divided by strike price, the exact expiry date, and whether the contract is a call or a put. Do not make the mistake of combining all these unlike contracts into one giant directional conclusion. You cannot mix a defensive put with an aggressive call and pretend they mean the same thing.

Open Interest vs Trading Volume 

While they may seem similar, open interest and trading volume represent two entirely different concepts. Think of trading volume as the water flowing out of a tap over a specific period. It aggressively counts every single transaction that happens during the trading session.

Meanwhile, open interest vs volume is about comparing that daily, chaotic flow to the water currently sitting quietly in the bathtub. It represents the actual stock of outstanding contracts at any given moment.

A day could easily have massive trading volume because a few contracts changed hands dozens of times between high-frequency algorithms. Yet, the total outstanding tally might not change at all.

When debating open interest vs volume, remember that volume resets to zero at the closing bell. The outstanding contract count does not; it carries over to the next day.

Where the Data Come From 

The OI data doesn’t just come out of thin air. In traditional finance, clearinghouses and major exchanges calculate them with rigorous precision. They aggregate this data at the contract level. Typically, you only get an official update at the end of the trading day. 

You’ll find it buried in daily exchange reports from entities like the CME Group. However, where we get OI from in crypto differs in reality. Since crypto literally never sleeps, platforms update this data constantly. It flows 24/7.

Because of this wild discrepancy, you must be meticulous. Require a precise source and a verified timestamp for every single chart you analyze.

Expiry, Rollover and Contract Migration

Every open interest has a specific date and time when it reaches its final lifespan, that’s its expiry. You probably have heard of open interest expiry moving the market, especially when there are huge funds set to expire on a specific date.

What actually happens when futures contracts approach their expiration date? The outstanding count drops like a heavy stone. Don’t panic when you see this on a chart. Traders aren’t fleeing the market in terror.

They are simply closing out their near-term positions and opening new ones further out in time. This routine phenomenon is known as rolling over. The total count will drastically fall in the expiring contract and simultaneously rise in a later one. 

The participants haven’t left the market at all. Because of this migration, you must be careful. Require contract-level labels whenever an expiry artificially affects your data series.

Reading Price and Open Interest Together 

Traders love to combine reading price and open interest to gauge market participation. But remember, these are possible interpretations of the market, not a sure way to tell where the market is going. If the price trend is rising alongside a rising outstanding OI contract count, it suggests something specific. It implies new money is actively entering the market to fuel the rally.

Conversely, if the price trend is rising but the contract count is actively falling, the rally might just be fueled by trapped short sellers scrambling to cover. That’s a classic short squeeze. Don’t jump to conclusions, though. The reality is often far more complex. 

Those brand-new positions might not be aggressive speculators at all. They frequently belong to risk-averse hedgers, neutral market makers, and algorithmic arbitrageurs, just locking in a spread.

• Price Up + OI Up: Often viewed as a strong uptrend with new buyers arriving.
• Price Up + OI Down: Typically short covering; a potentially weak, unsustainable rally.
• Price Down + OI Up: Often a strong downtrend fueled by aggressive new short sellers.
• Price Down, OI Down: Generally long liquidation; a weak decline as tired buyers exit.

Open Interest Alongside Funding and Liquidations 

To get the full picture of the market, you must look at open interest alongside funding rates and liquidation data. Make sure your datasets are perfectly timestamp-aligned. Comparing yesterday’s funding with today’s outstanding contracts is a sure way to lose money while trading.

Funding rates effectively tell you the cost of holding a position. Liquidations show you exactly when over-leveraged traders are forcefully ejected from the market by the exchange. If you see a massive spike in open interest during a highly leveraged price move, tread carefully. 

It could absolutely mean reckless speculation is taking over. Alternatively, it could simply be delta-neutral hedge funds stepping in to harvest those juicy funding rates without taking any directional risk at all.

What Open Interest Can Suggest 

Beyond the hype, open interest is a very reliable metric of broader market participation. It clearly shows you whether trading activity is expanding or contracting over weeks and months. 

OI also highlights concentration, telling you if traders are heavily focused on one specific contract or expiry date. However, do not blindly equate a high count directly with market liquidity. A market can easily boast millions of outstanding futures contracts. 

But if the bid-ask spread is terribly wide and the order book depth is tissue-paper thin, you will still get crushed on slippage. Always verify actual trading volume, spread, and order depth before assuming a market is safe to enter.

Common Interpretation Traps 

As we explained earlier, OI is just a metric, and like other metrics, it is open to interpretation traps. One of the biggest traps is double-counting long and short positions. Some traders see 5,000 contracts and assume there are 10,000 individual directional bets placed. Wrong. 

One contract equals one long and one short perfectly paired together. Another trap is confusing trading volume with the creation of new positions. High volume can simply be high-frequency day traders swapping the exact same contracts back and forth all afternoon.

Perhaps the most dangerous trap is treating a high count as inherently bullish. It’s not always the case. Also, ignoring the underlying contract size or the spot price can completely skew your historical comparisons and affect your predictions.

What It Cannot Tell You 

Just like every metric, there is a limit to what Open Interest can tell you. Attempting to use this metric beyond its limitations is just a recipe for disaster. 

For example, OI cannot identify every individual trader’s hidden motive. It will never predict the definitive, guaranteed market direction. It does not show the amount of hidden leverage being used behind the scenes.

Most importantly, it cannot guarantee liquidity during a flash crash, nor can it reveal whether the longs or the shorts are the smart money. It is crucial to distinguish cold, empirical facts from emotional sentiment.

Worked Example With Daily Data 

We’ve gone into detail about what OI is, now, let us consider a practical example. Imagine looking at a daily chart for September futures contracts on a major commodity, like crude oil.

On Tuesday, the price aggressively breaks a major historical resistance level. Simultaneously, the daily trading volume surges by 40%, and the outstanding contract count rises by 15,000. This specific combination suggests fresh conviction. 

New participants are actively putting fresh capital on the line to support the breakout. However, what if the price trend continued surging up on Wednesday, but the outstanding contract count suddenly dropped by 10,000?

You would need extra evidence to figure out why. You would look closely at a tight order book or negative funding rates to confirm if it was merely terrified short sellers throwing in the towel and covering their bad bets.

Open Interest in Crypto Perpetuals 

Crypto markets introduce a fascinating twist called perpetual futures. These are specialized contracts that never expire. Because they never expire, you don’t have to deal with the messy rollover dynamics seen in traditional markets.

You have to understand the underlying units. Some exchanges quote their perpetual futures in stablecoins like USDT, while others use coin-margined contracts settled in Bitcoin or Ethereum.

However, the data of perpetual futures gets exceptionally complicated because it is fragmented across dozens of highly active global exchanges. Furthermore, you must rigorously distinguish between coin-margined and stablecoin-margined perpetual futures.

Their underlying risk profiles are completely different. If you blindly add up these incomparable feeds into one massive, global number without a strict methodology, your data is sure to be wrong.

A Method for Comparing Venues 

When attempting to analyze open interest vs volume across different global exchanges, you need a strict, unforgiving methodology. Otherwise, your resulting data is utter garbage.

Before aggregating anything, specify the exact contract type. Specify the unit, the quote asset, and the exact conversion price. Always clearly state your venue coverage and the exact timestamp before running any aggregation math.

Why is this so critical? Because a dollar-denominated total will wildly change if the spot price of the underlying asset changes. This frustrating illusion can happen even when the actual, physical number of outstanding contracts hasn’t budged a single inch.

Conclusion

Open Interest is a powerful metric that shows the participation measure in any market. Unlike the rapid-fire, chaotic nature of trading volume, open interest offers a slower, broader, more strategic view of market participation.

It tells you if traders are actively gathering or quietly heading for the exits. While it’s a great metric, you must use it along with other metrics to get context. Without that vital context, OI just becomes another meaningless number flashing on a screen.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

Have you ever spotted a great price on an item online, clicked "Checkout," and realized the total shifted slightly before you confirmed? In the crypto world, something very similar happens when you make a trade, and it is known as slippage. (Slippage is the gap between the price you expected and the price you actually received)

Simply put, slippage is the difference between the price you expect when submitting an order and the actual average price at which your trade gets executed.

Because crypto markets move in real time, slippage can work in two ways:

Negative Slippage : You get a slightly worse price than expected, (paying a bit more to buy, or getting a bit less when you sell). This is what traders usually watch out for, as it quietly eats into your money.

Positive Slippage : The price moves in your favor before the trade finishes, getting you a better deal than you planned (buying cheaper or selling higher).

The Gap Between a Quote and a Fill

To see how slippage plays out in real numbers, let’s look at a simple example:

Imagine you place a market order to buy a token, expecting to pay $100. By the time your transaction confirms, the order actually settles at an average price of $101.50.

• Dollar Difference: An extra $1.50 per unit.
• Percentage Difference: A $1.50 increase represents 1.5% negative slippage.

On a single small buy, $1.50 might not seem like much. But scale that up to larger trades or multiple transactions over time, and that 1.5% gap can quietly take a noticeable bite out of your capital.

This just goes a long way to show that the screen price is an observation rather than a promise for unlimited size. The rate you see is simply the most recent trade or the best current offer, not a guarantee that every token you want is available at that exact number. 

How Slippage Happens in an Order Book

Looking under the hood of a traditional order book will help us understand why slippage occurs. 

When you place a market order, the exchange automatically matches your trade against the best available prices until the entire order is complete.

Imagine you want to buy 10 tokens with a market buy order. Here is how the available sellers (the "ask" side of the book) might look:

Thin Depth Near the Best Price

The example above highlights the role of market liquidity and order depth. The highest price on an exchange often has only a small pool of tokens.

If your order is bigger than the amount available at the best price, it will automatically use the next available prices. This means you may pay a worse price simply because your order is too large for the available liquidity at the top of the order book.

Price Movement While the Order Is Reaching the Market

Slippage also happens due to simple timing. In the fraction of a second between you tapping "Buy" and your order reaching the matching engine, the market itself can shift.

• Volatility & Breaking News: Sudden news or large trades can cause prices to move very quickly. The price may jump from one level to another before your order is filled.
• Competing Orders: Other traders or trading bots may buy or sell at the best price just before your order goes through. When this happens, your order may be filled at the next available price.
• Stop Orders: A stop-loss order becomes a normal market order once it is triggered. If the price is falling quickly, your order may trigger at your chosen price but actually be filled at a lower price.

How Slippage Appears in an AMM Swap

If you use a decentralized exchange (DEX), there is no traditional order book. Instead, trading happens against an Automated Market Maker (AMM) powered by a liquidity pool.

Simply put, a liquidity pool holds a paired reserve of two tokens (for example, Token A and Token B) governed by a mathematical pricing curve (like the constant product formula xy=k).

When you make a swap, you add one token to the pool and withdraw the other. This action changes the ratio of the reserves, which automatically adjusts the exchange rate.

In DeFi swaps, execution differences come from two distinct elements:

• Price impact (the price shift caused directly by your own swap size).
• Price slippage (the price movement caused by external trades and network delays before your transaction is confirmed on-chain).

Price Impact Comes From Your Trade

Price impact is the change in price caused by your own trade. The larger your trade is compared with the pool’s liquidity, the more the reserve ratio changes and the worse your execution price becomes.

Slippage is different: it is the price change that happens between submitting your transaction and its confirmation, often because of other trades or market activity.

In a nutshell, price impact comes from your trade while slippage comes from price movement before your trade confirms.

Slippage Tolerance Sets an Execution Limit

Slippage tolerance sets the worst price you are willing to accept. For an exact-input swap, it sets the minimum amount of tokens you will receive, while for an exact-output swap, it sets the maximum amount you are willing to spend.

If the price moves beyond your set limit, the transaction simply cancels (reverts) so you avoid a bad trade. Keep in mind that because the network still processed your request, you will still be charged the blockchain gas fee even though the swap didn't go through.

Slippage Is Not the Spread, Fee or Gas Cost

It is tempting to look at a completed trade and term every little deduction into a crypto trading fee. But behind the scenes, slippage, spreads, and network charges are completely different animals taking a bite of the deduction. 

Understanding who receives what, and why each cost exists in the first place helps you accurately evaluate the true cost of a trade:

All four dynamics work simultaneously each time you place a trade especially in Decentralised finance.

Calculate the Real Cost of Slippage

Calculating slippage is pretty straightforward. The math depends on whether you are buying or selling:

Example: A $5,000 Trade in Action

Let’s see how slippage stacks up alongside spreads and fees on a $5,000 market buy order:

Suppose a token is quoted with a mid-market price of $50.00. You place an order for 100 tokens ($5,000 expected value).

• Bid-Ask Spread: The lowest asking price on the book is actually $50.10 (a 0.20% spread cost = $10.00).
• Slippage: Because 100 tokens exceeds the depth at $50.10, your order walks the book and fills at an average price of $50.60.

-Slippage in percentage points:

          -Slippage cost: 100 tokens $0.50 price drift = $50.00.

• Platform Trading Fee (0.25%): Applied to the final trade volume ($5,060 0.25%) = $12.65.

Breaking down the final bill

In this scenario, pure slippage accounted for 1.00 percentage point ($50.00) of extra cost.

However, your total execution drag factoring in spread, slippage, and platform fees was $72.65 (or roughly 1.45% on top of your target entry). Separating these numbers ensures you know exactly how much came from the exchange fee versus pure market friction.

What Increases Slippage

Slippage is usually affected by four main factors:

• Order Size: Buying or selling more tokens than are available at the top price forces your trade into worse price levels.
• Low Liquidity: Thin order books or small liquidity pools mean even modest trades can move the price.
• Market Volatility: Fast price swings during breaking news or sudden rallies shift quotes before your order lands.
• Delays & Network Congestion: Slow routing or congested blockchains leave your order pending longer, giving prices more time to drift.

Because of these variables, the exact same token can experience completely different slippage depending on how and where you trade it:

• Trading Pair: Swapping against major pairs like USDT or ETH generally offers much deeper liquidity than trading against smaller, niche tokens.
• Venue & Platform: High-volume centralized exchanges have denser books than small decentralized pools, which can mean drastically different price impacts.
• Network & Timing: Peak global market hours (like overlapping US and European sessions) offer tighter execution than off-peak hours, while high on-chain gas traffic can slow down confirmations and widen price drift.

Why a Very High Slippage Tolerance Is Dangerous

Setting a very high slippage tolerance gives the market too much wiggle room. It tells the platform you are willing to accept a much worse price.

This leaves you exposed to sharp market drops or MEV bots that front-run your trade and deliberately push the price up to your maximum limit.

Setting an ultra-tight tolerance isn't always the answer either. Even a normal micro level price change can cancel your trade. Because you still pay blockchain gas fees on every failed attempt, several rejected swaps in a row can quickly cost you more than the slippage you were trying to avoid. 

The key is finding a balanced limit that guards against bad fills without causing failed trades.

The Uniswap help documentation recommends starting at 0.5% for most liquid pairs and adjusting upward only for low-liquidity tokens.

Ways to Reduce Execution Uncertainty

While you can't eliminate market movements entirely, a few practical habits can help keep slippage to a minimum: 

• Check Order Book Depth: Before tapping confirm, peek at the available liquidity near the current price to ensure there's enough volume to absorb your order.
• Use Limit Orders: Instead of market orders, use limit orders to name your exact price, your trade will only fill at that price or better.
• Trade Highly Liquid Pairs: Stick to high-volume pairs (like BTC/USDT) where dense order books naturally buffer against big price swings.
• Avoid High-Volatility Windows: Step aside during major news drops, token listings, or erratic market spikes when quotes shift unpredictably.
• Compare Routes & Aggregators: In DeFi, using a DEX aggregator can automatically route your trade through the most efficient liquidity pools for the best price.
• Reduce or Split Trade Sizes Carefully: Breaking a large order into smaller chunks prevents you from instantly wiping out the top of the order book.

Market Orders, Limit Orders, and Intent-Based Swaps

Different order types handle price certainty and execution speed in completely different ways and the kind that you use will influence your fill: 

Market Orders.

Prioritize speed over price. Your trade executes immediately, but you accept whatever prices are available on the book, leaving you open to slippage.

Limit Orders.

 Prioritize price over execution. You set the exact price (or better) you are willing to accept. Your price is protected, but if the market never reaches your level, your order will simply sit unfilled.

Intent-Based Swaps & Quoted Routes.

Instead of sending an order directly into a pool, you declare your desired outcome (e.g., "Swap 1 ETH for at least 3,000 USDC"). Third-party solvers or aggregators compete to fulfill that request. If they can meet or beat your minimum guaranteed outcome under the platform's rules, the trade settles, if not, it doesn't execute at all. 

Because every exchange and decentralized protocol handles order matching and cancellation rules differently, always double-check the specific execution policies of the platform you are using before trading.

When Slippage Matters More Than the Headline Fee

It is easy to choose an exchange based solely on whoever advertises the lowest trading fee. However, a platform with a tiny headline fee but thin order books can easily end up costing you more overall.

Let's look at a $10,000 buy order across two hypothetical exchanges:

In this specific scenario, Venue B delivers a significantly better net result despite having triple the advertised platform fee. Headline fees only tell part of the story, execution quality and available depth determine what you actually pay out of pocket.

Conclusion

We could be tempted to think that slippage is a hidden fee, it is not. It's simply the small gap that can appear between the price you see and the price you actually get infuenced by trade size, available liquidity, real-time market movement, and market design.

While you can't control how the broader market moves, you can protect your returns by looking beyond the screen quote. By evaluating the entire trade route, understanding order book depth, setting balanced tolerances, and picking the right order type, you can make sure your final fills match your expectations.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

There’s an opinion that novice and conservative investors should avoid volatile assets. These are considered high-risk. Therefore, many market participants associate volatility with something negative and dangerous.

However, it is not entirely correct to equate volatility and risk. Volatility is a characteristic of an asset, market, or sector that indicates dramatic return changes over a short period of time. It simply shows how widely returns move. The concept of investment risk is much broader. It reflects the possibility that an asset will not meet its purpose or may cause loss.

Below we explain what the difference between volatility and risk is. We’ll discuss why volatility can be a risk indicator but not the only criterion to judge an investment product. Learn how to handle various price fluctuation levels and create a solid portfolio.

How Volatility Is Measured

You always can google reputable financial portals and read about assets that experts consider volatile. This way you will receive a list of investment products, pre-sorted by the sharpness of return changes. For example, you will learn that tech stocks and cryptocurrencies are highly volatile, while real estate and cash are more stable. 

However, it is a good approach to analyze everything yourself, rather than trusting publications. So, it’s worth understanding how volatility is measured.

To define the annualized dispersion of investment returns, economists use this formula:

σ = √[ Σ(Ri – R̄)² / N ]

They calculate the square root of the average squared deviation from the population mean. Here, Ri is the individual return for period i, R̄ is the mean (average) return, and N is the total number of observations. In practice, analysts often use the sample version with n–1 in the denominator for historical data. Variance (σ²) is simply the standard deviation squared.

How to Understand Volatility vs Risk

Market volatility does not last forever and can vary greatly over time. Plus, the same asset can show different fluctuation levels depending on the period and dataset you have to calculate it. But imagine that you used the formula above and determined the standard deviation of four investments: the Tesla stock, the S&P 500 index, a crypto asset, and a treasury bond. Here’s what you should have gotten and what it means.

Historical vs Implied Volatility

There are two types of volatility investors encounter:

• Historical volatility explains how much an asset actually fluctuated in the past;
• Implied volatility explains how volatile the market can be in the future.

Usually, the figure calculated from past returns helps investors set expectations of the investment product’s future volatility. But volatility alone is never a complete forecast of loss. You should not avoid popular stocks just because their returns change. Adding them to your portfolio can suit your strategy quite well.

Volatility vs Risk: Investment Risks Beyond Price Swings

Volatility can be a risk indicator, but it’s not a scary thing, and it’s not the only reason why an investment product may cause trouble or not fit your strategy. Portfolio risks are factors that carry a downside risk and can make your investment result in a loss.

Volatility, Drawdown and Permanent Loss Compared

Changes in returns are often associated with two more important signals for investors: permanent loss and drawdown. The first one is related to volatility indirectly. Namely, fluctuations can show capital impairment or business failure, but a stable asset can still fail suddenly. For example, there may be fraud, delisting, or unpredictable bankruptcy.

Drawdowns are more closely related to market volatility, as they show how bad the worst drop was. The largest peak-to-trough percentage decline, however, does not tell whether losses are recoverable, whether this will repeat, and why the drop initially happened.

Here’s an original example our Venga expert prepared to show why drawdown and recovery matter as much as volatility. Imagine you want to buy one of two assets, both of which have annual volatility of ~18% over 5 years.

As you can see, the investment risk of Asset A is mainly related to recoverable drawdown, while that of Asset B includes permanent capital depreciation that cannot be signaled by volatility or drawdown before restructuring. That is why if you only measure volatility, you can't confidently judge the health of your portfolio or the risk of loss.

How Expected Return, Volatility and Risk Are Related

Volatility can partially or indirectly indicate the riskiness of an asset and suggest which products are suitable for different investor types. It’s believed that conservative assets are liquid products with 2–5% returns and minimal volatility, while aggressive assets are volatile instruments with returns of 8–12% or higher.

The higher the expected return is, the more aggressive products you need to try to achieve it. For example, with crypto, you have a better chance of getting +30% ROI than with CDS or bond funds (although this is not guaranteed), but the risk of loss also increases.

When High Volatility Can Be a Serious Risk

Market volatility is not considered evil. Still, assets with frequently varying returns can prevent investors from achieving their goals and harm their portfolios. This happens when a product like a stock or an ETF does not meet your risk profile and time horizon. 

For example, volatility can clash with your constraints if a short deadline forces selling after a drop and you lock in losses. Alternatively, swings can trigger margin calls and forced liquidation. Even with a long horizon, if you can't put up with deep drawdowns, you can panic and start selling, turning temporary decline into irreversible damage.

Risk Tolerance and Capacity

The same volatility can have different consequences for two people with varying risk profiles. You have to take into account your risk capacity and your risk tolerance. Capacity is the financial ability to handle sharp return and price volatility, while tolerance means emotional readiness to do so. Sometimes you can afford high volatility, but you just don’t want to. And sometimes you are willing to take on more risk, but your funds are limited, so you should not do this. Think about this before making financial decisions.

When Low Volatility Can Hide Investment Risk

The absence of fluctuations or minor changes in returns may indicate that the asset is also not okay. Low volatility can be an outcome of stale prices, liquidity risk, and credit quality deterioration. An asset may have negligible or near-zero profitability, or it may slowly become cheaper due to inflation. It also happens that you cannot sell a low-volatility product at the current price due to poor liquidity and are forced to accept large discounts.

A Two-Investment Comparison 

The Venga expert shared this comparison to help you understand when a stable-looking asset is problematic:

The first asset has obvious and continuous risks, while the problems with the second one are concealed until exit or a repricing event. Neither is universally safer. The volatile asset may not suit a short-term investor, and the stable one is not ideal for those who need liquidity without a downside risk.

Volatility and Risk in Crypto

Investing in cryptocurrencies is risky. Tokens, coins, protocols, and NFTs are volatile, and that is not the only concern. They also carry specific risks like chain exposure, sector exposure, bridge and wrapped asset exposure, platform and custody exposure, etc. Read more about crypto risk management in our full guide.

No Single Number Is Dangerous: How to Read Multiple Metrics

Historical volatility alone cannot capture the full risk picture. If it’s high, it’s not necessarily a no-go asset. Experts recommend analyzing several factors simultaneously to get a real idea:

• Analyze the drawdown to determine the worst loss from peak to trough.
• Measure the beta to learn the volatility of asset returns relative to the market.
• Calculate the Sharpe ratio to find out the excess return generated per unit of risk.
• Find credit ratings that assess the solvency of the issuer or platform to choose reliable options for money placement.
• Learn more about liquidity risk, as well as measures like spreads, depth, and turnover, to know how easily you can exit a position when you need to.

Volatility Is a Measurement, While Risk Is a Decision Context

Now you know how volatility and risk are different. Volatility does not fully capture many of the ways an investment can go wrong. It is a feature of an asset or market that indicates big return changes. Sometimes it is related to risks, such as time horizon, credit, concentration, and currency, and sometimes it is not. It does not make an asset good or bad. Moreover, an asset with either high or low volatility may not be a proper option for investing if it has some other serious problems.

Calculating the volatility of an asset can be useful, as it can tell you which products are suitable for your investment strategy and willingness to take risks (capacity and tolerance). Still, it should not dictate the choice of investment products alone. It is worth considering other factors, risks, and your preferences to ensure that your portfolio is balanced.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

Cognitive biases are predictable mental shortcuts that influence how people notice, interpret, and respond to information. Crypto markets are full of them: prices can swing dramatically within hours, information is often fragmented, social media exerts influence, and participants frequently must decide with incomplete data.

Why Crypto Can Amplify Decision Pressure

Many crypto markets operate continuously, including weekends and holidays. Investors can therefore encounter price movements, news, and social-media activity at any hour. Continuous access can make it harder to establish natural pauses between observing market developments and making an investment decision.

Rapid gains and losses can quickly change attractiveness or risk, but volatility itself does not indicate that an individual investor is prone to making emotional or biased decisions.

The fragmentation of the information received can also create confusion among crypto investors, especially newbies. Information related to cryptography is disseminated through project documentation, blockchain data, exchanges, financial research, and news outlets. These sources may differ in terms of quality, timeliness, and interpretation.

Crypto asset communities can provide useful information, technical discussions, and various viewpoints, as well as introduce investors to established opinions and rapidly spreading stories. Participating in a community should not automatically equate to herd behaviour. However, when being part of it, you shouldn’t forget about reasonable calculations and your own direct experience. 

Crypto platforms and social media often focus on successful deals, large profits, and the stories of early investors. Such examples represent isolated results rather than a complete picture of crypto investing. Viewing these stories certainly doesn’t mean that a person will inevitably experience FOMO, take on excessive risk, or develop a tendency toward overconfidence bias. Nevertheless, they often trigger cognitive biases among crypto investors. 

Confirmation Bias: Looking Only for Support

Confirmation bias occurs when an investor gives greater attention or credibility to information that supports an existing belief while giving less weight to evidence that challenges it. This does not mean that every holder who prefers positive information is necessarily displaying confirmation bias. Investors may reasonably assess evidence differently, and conflicting information can vary considerably in quality.

Suppose an investor holds a cryptocurrency because they believe its network adoption will increase. They encounter a report showing higher network activity and regard it as evidence supporting their thesis. Later, they read a report highlighting slowing developer activity. Rather than assessing both pieces of information using the same criteria, they immediately regard the positive report as credible and the negative report as unreliable.

Before making or reviewing an investment decision, maintain a simple evidence log with two separate sections:

Recency Bias and FOMO

Recency bias means giving too much attention to recent events and ignoring the past. In crypto investing, this can happen when a cryptocurrency has been rising for several weeks. An investor may think the price will keep going up, because the recent growth feels normal. At the same time, they may pay less attention to earlier periods of price declines, stability, or high volatility. FOMO can add a social dimension to this effect. When investors repeatedly see posts about rising prices, profitable trades, or successful early buyers, those visible examples can create a sense of urgency. 

Overconfidence After a Winning Streak

A series of successful trades can make an investor feel more confident in their ability to predict the market. However, overconfidence bias can arise when good results are taken as proof that every decision was well made.

A good outcome does not always mean the decision was sound. An investor may buy cryptocurrency with limited research, take a large position, and still profit simply because the market moves in their favour. The result is positive, but the decision may have involved significant risk. After a winning streak, an investor may increase position sizes or trade more frequently, believing success will continue. This can increase exposure to mistakes, fees and market volatility. 

There is also a risk of incomplete attribution. An investor may credit their own skill for successful trades while giving less consideration to factors such as a favourable market environment, unexpected news or simple chance. Reviewing unsuccessful decisions alongside successful ones can provide a more balanced assessment. 

Anchoring to a Price or Prediction

Anchoring bias is a perceptual distortion where investors give too much weight to a particular number—such as the price they paid, a coin’s all-time high (ATH), or someone’s public price target—and use it as a reference for judging what the asset is worth today.

We can take a few examples. The most impressive anchoring bias is the purchase price. You buy Bitcoin at $100,000. If it falls to $70,000, you may think, “It’s cheap because I know it can get back to $100,000.” But your $100,000 entry price does not determine Bitcoin’s current or future value.

Another anchoring bias is fixating on all-time highs. So, Ethereum previously reached $5,000, so one might assume $3,000 is a bargain. However, the old ATH is simply a historical price; changing adoption, competition, regulation, or market conditions may make the previous peak less relevant.

Public prediction also should not be taken as an instruction. An analyst predicts a token will reach $10. If you anchor to that target, you may continue holding even after the project's fundamentals deteriorate, because you are comparing everything to the $10 prediction.

The danger is that the anchor can make investors interpret new information through an outdated reference point. Instead of asking “What is this asset worth given what we know now?”, they ask “How far are we from the price I expected?”

A better approach is to re-evaluate the investment from the current information: 

• network usage, 
• revenue or fees where applicable,
•  token supply and dilution, 
• developer activity, 
• competition, 
• regulation, 
• market conditions, 
• and the project's actual progress. 

New information may matter far more than the price at which you bought or the highest price the asset once reached.

Availability and Authority Bias

These occur when people give too much weight to information that is especially memorable, vivid, recent, or easy to recall. In crypto investing, a dramatic headline, a widely shared success story, or repeated examples of a coin’s price surge can make that information feel more representative or important than it actually is. Less visible evidence—such as failed projects, conflicting data, or long-term performance—may receive less attention simply because it is harder to remember or less frequently discussed. 

Authority bias can have a similar effect. Investors may place extra confidence in a claim because it comes from a prominent CEO, analyst, influencer, celebrity, or other confident public figure. A person’s credentials, experience, reputation, or popularity can be relevant context, but they do not prove that a particular prediction or claim is correct. 

Sunk Cost and the Endowment Effect

The sunk cost effect occurs when money or resources already spent influence a decision about what to do next, even though those costs cannot be recovered. For example, if you bought a cryptocurrency for $10,000 and it is now worth $4,000, the original $10,000 should not determine whether you continue holding it. That money is already spent. The relevant question is whether owning the asset from today offers an attractive risk-and-return opportunity compared with the alternatives.

Ownership can create a related endowment effect, where people value something more simply because they already own it. An investor may therefore demand a higher price to sell a token than they would have been willing to pay for the same token before owning it.

One way to reduce the influence of these cognitive biases in crypto investing is to evaluate an asset as if it were not already part of the portfolio. 

Loss Aversion and the Disposition Effect

Loss aversion describes the tendency to experience losses more strongly than equivalent gains. In crypto investing, this can lead investors to hold a losing position for too long because selling would make the loss feel final. During a sharp market decline, the same cognitive biases can contribute to panic selling, as investors focus on avoiding further losses rather than calmly assessing the asset’s future risk and return. The disposition effect in crypto investing is a related pattern in which investors tend to sell assets that have increased in value relatively quickly while holding onto assets that have fallen in value. 

Herd Behaviour and Survivorship Stories

Crypto investing is strongly influenced by herd behaviour: investors often look to the actions and opinions of others when deciding what to buy. Rising prices, large trading volumes, social-media activity, and influencers promoting a particular token can create the impression that “everyone” is making money. These crowd signals can reinforce themselves because more attention attracts more investors, which can push prices higher and make the project appear even more successful. 

Richard Lehman, an adjunct professor of Behavioural Finance at UC Berkeley Extension, states, “Herd behaviour tends to cause people to blindly follow others, and it contributes to FOMO, neither of which is considered a rational reason to invest”. This is closely connected to survivorship bias. Investors are much more likely to encounter stories from people who made substantial profits than from those who lost money. As a result, the visible examples may make crypto investing appear more consistently successful than it actually is.

Testimonials and screenshots have important limitations as well. A screenshot showing a large profit does not establish the investor's overall performance. It may show one successful trade while hiding other losses, fees, taxes, leverage, or the amount originally invested. Testimonials are also self-selected, meaning people with dramatic success stories are more likely to post them than ordinary investors with mixed or negative results. 

Statements made by influential people require the same level of caution. An influential person may have financial relationships with a project, receive tokens or sponsorship support, or benefit from increased attention, even if subscribers lose money. 

How Several Biases Can Reinforce One Another

Herd behaviour and survivorship bias can create a feedback loop of apparent success. Visible winners attract followers, followers generate more attention, and the resulting popularity makes the winners seem representative of the wider market. A more reliable assessment requires looking beyond success stories and considering failed projects, base rates, independently verifiable performance, risks, and the full distribution of outcomes. Of course, this doesn’t mean that all investors follow the same pattern. However, for better understanding these processes, we can present them as an active cycle: 

Recent gains → Attention → Authority → Herd confirmation → Conviction/anchoring → Reversal → Loss aversion → Delayed reassessment 

The cycle begins with recent gains. A cryptocurrency rises sharply, creating a salient success signal. The price increase attracts attention from investors who might otherwise have ignored the asset. Strong recent performance makes the asset more noticeable and can create the impression that something important is happening. Increased visibility brings in more observers and potential investors.

Social-media engagement, rising trading activity, testimonials, and the number of people discussing or buying the asset can then reinforce the original story. Investors may become anchored to recent highs or to a particular price target. 

When the price reverses, the previous high can remain psychologically important. Loss aversion can make realizing the loss especially uncomfortable, potentially encouraging an attempt to “wait until it gets back to” the anchored price. 

The cognitive biases do not necessarily occur in this exact order, and they can interact differently across people and market conditions. This model’s purpose is to show how several individually understandable psychological mechanisms can combine into a self-reinforcing process. 

A Decision Journal Example

The goal is to make the rationale behind the decision visible and accessible for review. However, this method does not guarantee a higher return. 

Bias-Reduction Techniques and Their Limits

Existing methods for eliminating cognitive biases can make the decision‑making process more balanced. However, they should be viewed more as precautionary measures than as guarantees.

When a Bias Label Can Mislead

Keep in mind that bias labels can themselves become a source of cognitive biases. Changing your view after genuinely new, relevant evidence is not automatically panic; sometimes it is exactly what good decision-making requires. Conversely, staying invested despite changed circumstances is not automatically discipline; it can also reflect attachment to an earlier thesis or reluctance to admit that an assumption was wrong.

The same action can be sensible for one person and unsuitable for another. Your objective, time horizon, financial position, and capacity to tolerate and absorb losses all affect what constitutes a reasonable decision.

Ultimately, the aim is not to eliminate every bias or produce perfect decisions. It is to make the reasoning visible, remain open to updating it, and distinguish thoughtful adaptation from impulsive reaction.

Conclusion: Better Decisions Start With Better Questions

A useful way to understand cognitive biases in crypto investing is to group them by what they distort:

• Information biases such as confirmation bias, availability, anchoring, and recency bias can influence what evidence we notice, remember, or give weight to.
• Confidence biases, including overconfidence bias, hindsight, and the illusion of control, can make our judgments feel more certain than the evidence warrants.
• Biases of reactions to gains and losses, like loss aversion, the disposition effect, and recency effects, can shape how we respond emotionally to profits, setbacks, and changing market conditions.

Recognising these patterns can help us ask better questions: What evidence am I overlooking? How confident should I really be? What would change my mind? Am I responding to the situation or simply reacting to a recent gain or loss?

Awareness can improve the decision-making process, but it cannot guarantee a particular outcome, remove uncertainty, market risk, or emotional reactions. The goal is to make assumptions clearer, challenge our own reasoning, and create decisions that can be reviewed and updated as circumstances change.

Disclaimer: The content provided in this article is for educational and informational purposes only and should not be considered financial or investment advice. Interacting with blockchain, crypto assets, and Web3 applications involves risks, including the potential loss of funds. Venga encourages readers to conduct thorough research and understand the risks before engaging with any crypto assets or blockchain technologies. For more details, please refer to our terms of service.

Every investment costs something to buy, hold and eventually sell. Investment fees are the direct and indirect charges you pay for that, whether the money leaves your account visibly or gets quietly deducted inside a product before you ever see it.

Some investment fees are obvious. A commission on a trade, an annual account charge. Others sit inside the price of what you bought and never appear on a statement at all.

Below you will find investment fees explained from a Spain and EU angle, because that is where the product documents and tax rules apply for most readers here. If your search results throw up American terms like Form CRS or 12b-1 fees, those come from a different disclosure system. More on that later.

Why Small Fees Can Matter Over Time

Investment fees do two things. They take money now, and they remove that money from the pot that could have earned something later.

The second part is the one people underestimate.

Here is a comparison with no growth assumed at all, so nothing below implies a likely return. Take €10,000. Leave it alone for ten years. Deduct the annual charge at the end of each year from whatever is left.

Formula: final balance = €10,000 × (1 − annual rate)¹⁰

At 0.25% a year, charges take €247 over the decade. You finish with €9,753.

At 1.20% a year, charges take €1,137. You finish with €8,863.

Same money, same ten years, nothing else different between them. The gap is €890, and that is before either portfolio has earned or lost a cent.

Just under a percentage point a year sounds like rounding. Over ten years on €10,000, it is €890.

Add growth to the picture and the gap widens, because the larger charge also eats into whatever those deducted euros would have gone on to earn.

The Main Types of Investment Fees

Rather than listing every charge alphabetically, it helps to sort them by when they arrive.

• At the point of entry. Subscription charges, purchase commissions, and the spread built into the price you get. Paid once, at the start.
• While you hold. Management fees, ongoing charges inside a fund, custody, platform and account fees. These repeat every year, whether the investment does well or badly.
• On the way out. Redemption charges, selling commissions, withdrawal and transfer fees.

Cutting across all three is a second distinction. Some charges you pay directly, and they show up on your statement. Others get deducted inside the product before the price you see is even published.

That second group is where hidden investment fees tend to live. Although ‘hidden’ usually means disclosed somewhere you did not look, rather than concealed.

How Fees Differ by Investment Product

Different products stack their investment costs differently. A share has almost nothing built into it and everything at the point of trade. A managed portfolio is close to the reverse.

The table below asks the same four questions of each product. Not every provider charges every line, so treat it as a map of where to look rather than a bill.

Account, Advice and Management Fees

These are the charges tied to the service rather than to the product itself.

Flat account fees are the simplest of the lot. A fixed euro amount per year, regardless of how much you hold. On a small balance a flat €50 stings; on a large one it barely registers.

Percentage charges work the other way round. An advice or portfolio management fee of 0.80% a year is calculated on the value of what you hold, so it grows as your money grows.

Always check what the percentage is applied to. Usually it is the portfolio value averaged over the period, but the base is set out in your contract.

Custody charges cover holding your securities. Some Spanish banks apply them and some do not, and the rates vary widely between providers.

Inactivity fees appear if you go quiet for long enough. Worth knowing about before you open an account rather than after.

One Spanish detail that catches people out. Discretionary portfolio management and investment advice both carry 21% IVA (impuesto sobre el valor añadido, the Spanish equivalent of VAT). Order execution is exempt. So a management fee quoted at 0.80% before tax actually costs you 0.968% once the IVA lands. Some providers quote the figure with tax already included, so it is worth checking which you are looking at.

Fund and ETF Costs

The expense ratio is the number most people look at first, and as a starting point that is fair enough.

An expense ratio, sometimes labelled the ongoing charges figure or the total expense ratio, is the annual cost of running the fund shown as a percentage of its assets. It covers the manager’s charge, administration, custody and audit. It comes out of the fund’s price daily, so it never arrives as a bill.

Spanish law caps what a fund can charge. The management fee cannot exceed 2.25% of assets, or 18% of results, or 1.35% plus 9% where a fund uses both bases. Depositary fees are capped at 0.2%. Subscription and redemption charges are capped at 5% each. The CNMV sets out these limits in full.

Those are legal ceilings, not typical figures. Actual charges land nowhere near them.

During 2026 a broad global index ETF typically charged somewhere between 0.12% and 0.20%. A handful went lower. The cheapest sat close to 0.05%.

But an expense ratio does not capture everything. Portfolio transaction costs, which the fund pays when it buys and sells its holdings, sit outside it. So do performance fees and any entry or exit charge.

For any specific product, the current KID and prospectus are the only figures worth quoting. Fees change, and old numbers travel a long way on the internet.

Trading, Spread and Currency Costs

Trading fees and the spread are different animals, and only one of them appears on your contract note.

A commission is what the broker charges to execute your order. Brokerage fees have fallen hard over the past decade, and plenty of platforms now advertise zero commission on certain trades.

That does not make the trade free.

The spread is one of the more common hidden investment fees. It is the gap between the buying price and the selling price at the same moment. Buy and immediately sell, and you lose that gap. On a liquid ETF it is a rounding error. On a thinly traded bond it can dwarf whatever commission you saved.

Order size matters too. Push a large order into a thin market and the price moves against you as it fills. This is called market impact.

Then there is foreign exchange. Buy a fund priced in dollars from a euro account and the platform converts for you, charging as it goes. A currency conversion fee of 0.15% is competitive. Plenty of brokers and most banks charge considerably more, and the currency conversion fee applies again when you sell and convert back.

Crypto Transaction and Network Costs

Crypto adds a layer that traditional products do not have. The network itself charges you.

Buying through a platform usually involves a fee, a spread, or both. The fee is stated up front; the spread is the difference between the platform’s price and the wider market price.

Moving crypto off a platform triggers a network fee, paid to the blockchain rather than to your provider. This one moves with congestion. The same transfer can cost cents one day and considerably more the next.

Withdrawal charges, payment method costs (card payments typically cost more than a bank transfer) and any fees on staking or earning products stack on top of that.

Where Fees Are Disclosed in Spain and the EU

Investment fees are documented rather than mysterious. The paperwork exists, and providers are required to hand it over.

• The KID (key information document) is the short summary for packaged retail products. Since 1 January 2023 it has replaced the older UCITS KIID across the EEA for retail investors. It shows costs over different holding periods and carries a reduction-in-yield figure, which estimates how much the total cost trims from your annual return.
• The prospectus is the long version, with fee caps and calculation methods spelled out properly.
• The fee schedule (folleto de tarifas) is your provider’s own price list. Spanish firms have to make it available and hand it to clients at the start of the relationship.
• Ex-ante cost disclosure comes from MiFID II. Before you buy, the firm must give you an aggregated cost figure covering both the product and the service. You can request an itemised breakdown of it.
• Contract notes and periodic statements confirm what you actually paid, after the event.

One note for anyone reading English-language search results. American pages reference Form CRS, 12b-1 fees and sales loads, all set out on the SEC’s investor education site. Those are US disclosures under a different regime. The underlying concepts overlap, but the documents do not.

Taxes Are Costs to the Investor, but Not Product Fees

Tax reduces what you keep. It is not a fee, though, because no provider receives it, and it belongs on its own line when you compare investment costs.

In Spain, investment income and gains fall into the savings base, the base del ahorro. The 2026 rates match 2025.

Your first €6,000 of savings income is taxed at 19%. The next slice up to €50,000 goes at 21%. After that it steps to 23% up to €200,000. Then 27%. Then 30% once you pass €300,000.

Dividends and interest usually arrive with 19% already deducted. Spain counts that against what you eventually owe.

What you actually keep depends on your residence, your account, the product and your own circumstances. Rates change and regional rules differ.

Every figure above is dated to 2026. Check the Agencia Tributaria before relying on any of it. For crypto specifically, our guide to crypto taxes in Spain goes through the reporting rules in detail.

How to Compare the Total Cost of Two Investments

Setting one percentage against another rarely tells you much about real investment costs. What you want is the total cost of holding the same amount, for the same period, behaving the same way.

Here is that framework applied. Same €10,000, same ten years, no growth assumed.

Product A charges 2% on entry, 1.20% ongoing, and 1% to exit. Total cost over the decade: €1,401.

Product B costs roughly 0.30% to buy once brokerage fees, spread and conversion are counted, 0.20% ongoing, and 0.30% to sell. Total cost: €257.

Five and a half times the difference, on identical money over an identical period.

Tax sits outside both figures, because it depends on your gain rather than on either provider.

Fees That Depend on Behaviour or Circumstances

The same product can charge two people very different investment fees.

• How often you trade – Structures with high trading fees punish frequent activity. Buy monthly and a fixed €5 order fee on a €100 purchase is 5% before you own anything.
• How long you hold – Entry charges spread thin over decades and hurt badly over months. Ongoing charges do the opposite.
• Which currency you use – Buying a euro-denominated share class sidesteps the conversion entirely.
• How big your orders are – Fixed fees favour large orders; percentage fees are indifferent.
• When you leave – Some products apply a charge for early exit.

A pricier-looking product sometimes wins on overall investment costs. A fund with a higher expense ratio but no per-trade commission can beat a cheap ETF if you are buying small amounts every month. That is not a recommendation, only arithmetic worth running for your own case.

The cheapest product on paper is not always the cheapest product for you.

How Much Return Is Needed to Recover a Fee?

Here is a question worth asking before buying anything. How much does this need to earn just to get me back to where I started?

Take Product A from above. It charges 2% on entry, 1.20% ongoing, and 1% to exit.

The arithmetic: (1 − 0.02) × (1 + g) × (1 − 0.012) × (1 − 0.01) = 1, solved for g.

To finish year one holding exactly what you put in, Product A needs a gross return of 4.32%.

Product B, at 0.30% to buy, 0.20% ongoing and 0.30% to sell, needs 0.80%.

Neither number is a forecast. Nothing here predicts what either product will earn. It measures the hurdle, and the charges set the hurdle entirely.

Limits of Fee-Only Comparisons

Low cost is not the same thing as low risk.

A cheap fund can still lose money. Market risk, credit risk, liquidity risk and the way a product is structured all sit outside the fee table. A badly diversified portfolio at 0.10% can do more damage than a sensible one at 0.80%.

Custody matters too. Where your assets are held, and how well protected they are if the provider fails, has nothing to do with what you are charged.

To verify a current figure, go to the KID or prospectus for products, the fee schedule for services, and your own contract notes for what you actually paid. Check the date on each one.

Conclusion: Compare the Full Cost Over the Intended Holding Period

The useful comparison unit is not a percentage. It is the total cost of holding the same amount, for the period you actually intend to hold it, behaving the way you actually behave.

That number takes about ten minutes to work out, and it answers the question you were really asking.

Investment fees matter. They are also the easiest thing to measure, which is partly why they get more attention than risk, access and whether the product suits what you are trying to do. Those are harder to put a number on, and no less important for it.

The figures in any guide, this one included, carry a date. The current documents are the ones that count.

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