Pro traders use a combination of futures trading strategies to generate profits while limiting their liquidation risk.
Every once in a while, headlines about $100 million or larger Bitcoin (BTC) and crypto futures contracts liquidations appear, causing novice investors and non-expert analysts to point to excessive leverage by retail traders as the culprit.
Gamblers are undoubtedly responsible for a large portion of these risky bets, especially when the liquidation is concentrated on retail-oriented exchanges such as Bybit and Binance, but not every futures liquidation is the result of reckless leverage use.
Some trading strategies used by professionals also end up being liquidated during sudden sharp price moves, but they do not necessarily represent a loss, or a sign of excessive leverage. The Chicago Mercantile Exchange (CME), OKX and Deribit typically exhibit a much lower liquidation ratio when compared to retail-driven exchanges, indicating that those traders are usually deploying more advanced strategies.