From Sudden Wealth to Bankruptcy: The Varied Lives in Contracts

This article was published on October 27, 2019, on the Chain Catcher WeChat public account, authored by Wang Dashu.

In the cryptocurrency industry, contracts have become increasingly enticing, especially for newcomers with dreams of getting rich quickly. Contracts serve as a shortcut to financial freedom. However, where there are towering successes, there are also devastating failures; the cryptocurrency contracts conceal countless varied life stories of investors.

This time, Chain Catcher focuses on the anxious journey of contract players, including female executives from exchanges, freelancers, and young people who have served as village officials. Beneath different exteriors, they are playing out almost identical stories.

1. The Reversal of the Village Official Youth

From a college student village official and cybersecurity consultant to a rookie in the crypto world, 90s-born youth Ke Hua from Shandong has experienced a life full of dramatic colors in recent years.

In 2014, Ke Hua graduated from a university in Beijing. In response to the national call and to fulfill his aspirations for governance, he chose to go to the suburbs of Beijing to become a village official. Planning cultural activities for towns and villages was his specialty, and he won several awards for it.

By 2017, after completing his term, Ke Hua had saved over 100,000 yuan, which he was not satisfied with, as he was still far from financial freedom.

In 2017, after three years in office, Ke Hua faced re-employment. After much deliberation, he chose to work as a cybersecurity consultant at a cybersecurity company, where mining pools and exchanges were major areas of concern. Huobi was one of his clients.

Through this job, Ke Hua was exposed to digital currencies for the first time. "While serving Huobi, I saw their trading volume was quite large, indicating that many people were trading digital currencies. Out of curiosity, I tried buying some, and gradually started trading coins. After getting into contracts on Huobi, I also began trading contracts," Ke Hua said.

His first experience with contracts brought him a moment of glory, exciting yet terrifying.

At that time, Ethereum rose from $80 to $160, and Ke Hua's intuition told him that the market would definitely decline in the future. With the fearless spirit of a rookie, he opened his first contract, using over 200,000 yuan to short 200 Ethereum. He chose to close the position when his profits reached 300%, earning 500 Ethereum in just a few days.

"I felt pretty awesome at that time, making money on my first trade. I thought I could achieve financial freedom through trading contracts, but during the process, there were moments when I was just one dollar away from liquidation. If the market hadn't reversed, I might have lost everything. Thinking about it, it's really scary," he lamented.

In May of this year, Ke Hua experienced a major liquidation. He had invested 10 Bitcoin with 20x leverage, going all-in on a short position. Unfortunately, the market skyrocketed from $5,000 to $8,000, resulting in a significant reversal, and his 10 Bitcoin were wiped out in an instant.

This liquidation made him realize that money earned by luck can easily be lost through skill. Ke Hua said, "After that liquidation, I couldn't sleep for many days. I haven't opened large positions since; at most, I invest a few tens of thousands with 5-10x leverage. I no longer expect to achieve financial freedom through it; I'm fine with earning a little less."

Now, after experiencing several liquidations, Ke Hua's asset value has significantly declined, but it has still brought about a dramatic change in his life. "At my peak, I had nearly 20 million yuan. I could buy thousands of items and suits worth tens of thousands without blinking, and I also bought many things for my parents, which I never dared to imagine when I was a village official."

He has now left that cybersecurity company and is living in a rented apartment costing 20,000 yuan a month, contemplating how to achieve financial freedom through reliable means, specifically, buying a house in Beijing.

In fact, he could have achieved this goal earlier, but people always stand on one mountain, looking at the higher mountain. After earning 10 million, he still wants 100 million; ultimately, goals succumb to desires.

"I am now increasingly cautious when trading contracts. Before opening a position, I look at analyses from experts online, combining factors like K-lines, open interest, long-short comparisons, and real-time news to make a comprehensive judgment before deciding whether to go long or short," Ke Hua stated.

However, in reality, he mostly opens short positions in his contract operations. The most he has earned was from a short position, and the most he has lost was also from a short position, as if there is a Zen-like emptiness in everything.

Recently, Ke Hua has rarely traded contracts. He has enrolled in an MBA program at the Chinese Academy of Sciences, hoping to find a new key to wealth through education. He told Chain Catcher, after all, trading coins is not a long-term business, and contracts are not a reliable livelihood.

When he said this, his tone revealed expectations for the future, as if he had become more resolute after being tempered by the crypto world. Sometimes, he recalls the days of being a village official, with a meager salary and a relatively frugal life, but he enjoyed that feeling, much like when he performed in a campus play "The Rhinoceros" during college, filled with excitement and contentment.

2. The Contract "Addict"

Xiao Dan is a freelancer who enjoys playing music and gambling. Unlike Ke Hua, he is more impulsive and has his own little schemes. His family knows very little about his activities, including his addiction to contracts and his desire to achieve financial freedom through trading coins.

In 2017, he watched his old friends become increasingly wealthy through trading coins, which made him a bit envious. After some initial research, Xiao Dan set his sights on mainstream coins like Bitcoin and Ethereum.

"Trading coins brings quick money, and the returns from contracts are even greater. Why not? I naturally had my concerns, but once I decided to play, I couldn't be wishy-washy," Xiao Dan recalled his initial mindset when he entered the market.

Although he, like Ke Hua, was a fearless rookie, he was not as lucky and faced liquidation on his first contract trade.

Xiao Dan's first experience was with OKEx. One day in 2018, he invested 5,000 USDT, going all-in with 20x leverage on a long position for Bitcoin. Unfortunately, he encountered a downturn in Bitcoin's price, and his money was lost. Xiao Dan's mindset immediately collapsed. In the following days, he began to suffer from insomnia and sometimes felt so distressed that he thought about jumping off a building.

After that liquidation, Xiao Dan was overwhelmed with regret and fear, and he decisively uninstalled all contract platforms, vowing never to touch this "poison" that nearly cost him his life again.

However, it wasn't long before he felt the urge to trade again. He could accept defeat, considering the lost money as tuition, but he was unwilling to give up and wanted to take another gamble.

Now, Xiao Dan still hasn't sought employment. He has almost been consumed by the thrill and addiction of trading coins, spending most of his time outside of sleep watching the market or playing mahjong with friends.

Xiao Dan's mindset is based on his experience in stock trading. He has been involved in the stock market for a long time and has accumulated considerable wealth, so he is not a "fool" without financial knowledge. However, the skills he learned in the stock market did not translate well to trading coins, failing to prevent losses or quell his inner desires, and he could not escape the "curse" that gamblers face.

Of course, Xiao Dan also has a relatively rational side. "I never trust those online analysts who claim to know the direction. They mainly rely on technical indicators for analysis, but technical indicators are not very useful in the crypto world. It mainly depends on market sentiment and news. Moreover, indicators are static, while human emotions are dynamic. You can't fathom the intentions of the market makers just by looking at indicators, so how can you expect to win?" Xiao Dan told Chain Catcher.

Now, Xiao Dan has tried all kinds of contract platforms, and his operations have become increasingly conservative. For example, during the market fluctuations on September 25, he took a half-position with 20x leverage to short Bitcoin and made a small profit.

Xiao Dan said that although he is addicted to contracts, he will no longer be as aggressive as he was when he first started. He maintains a position of 20-30% and never exceeds half a position to minimize risk, but he still mostly uses 20x leverage.

"Generally, you can't make money trading contracts. However, the money I've lost in contracts has been made back in other areas, which is quite lucky. I haven't encountered any flash crashes, and as long as I don't go bankrupt, I'm content," Xiao Dan said with a hint of irony. Now, he prepares himself for the possibility of losing all his money the moment he invests, not for profit, but just to satisfy his urge, unlike when he first started, where he was happy when he made money and wanted to die when he lost.

During the interview, Xiao Dan wanted to warn those who have never traded contracts to definitely stay away from them. If they unfortunately do, they should hold on and look at the long term; there will always be surprises.

But for Xiao Dan, contracts have become an addiction that he cannot shake off, becoming an indispensable part of his life for a long time.

3. The Exchange Executive with Multiple Liquidations

Selina is a typical career woman, labeled as an "independent 90s-born."

"I am someone who is good at independent thinking. I transitioned from the internet to blockchain in 2017, just after the 94 incident. It was a node filled with challenges and opportunities. I invested in several profitable projects but also encountered projects that ran away. 2018 saw significant market fluctuations, making it a great time for contract trading, and I jumped right in," she recalled.

Unlike Ke Hua and Xiao Dan, Selina is not only a contract player but also a blockchain practitioner. As an executive at an exchange, her familiarity with the industry makes her more focused during operations. However, luck does not favor her any more than others; on the contrary, she has faced many obstacles, including two liquidations on OKEx contracts.

In early 2018, OKEx experienced abnormal trading in BTC contracts, leading to a data rollback. During this time, users were unable to log in to the trading page, resulting in Selina's first liquidation.

"I lost about 1.5 Bitcoin on my first liquidation, which was my second time trading contracts. Compared to others in the industry who lost money, it was nothing significant, and I had long been prepared for losses," Selina admitted.

However, the second liquidation nearly shattered her mindset. Around May last year, Ethereum dropped from around 10,000 yuan to 3,000 yuan. She heavily invested in 200 Ethereum with 20x leverage on a long position. Unfortunately, Ethereum did not meet her expectations and continued to decline, leading to liquidation.

"When I first started, I traded with light positions and low leverage. Losing wasn't a big deal; it felt like buying a bag. But heavy positions are different. Since losing 200 Ethereum, I've felt anxious and unwilling to accept it. I keep wanting to open heavy positions to win back my losses, as if I’ve been possessed by a gambler. However, my friend Xiao Liu's experience has awakened me. After losing tens of millions, he borrowed money at high interest to increase his position, and now he faces huge debts every day when he wakes up. It's terrifying," Selina said meaningfully.

Xiao Liu's choice is not an isolated case; the death of Huobi's founder, who used 100x leverage, is a similar story.

In the game of contracts, "leverage" does not favor you because you have investment experience or double the courage. Where there are towering successes, there are also devastating failures; they are all bloody chips.

Due to work requirements, Xiao Liu leads a team to analyze market data. Selina told Chain Catcher, "From the overall data, the profit and loss of users in the contract market basically follows the 80/20 rule, with 70%-80% of users losing money and only about 10% making a profit."

Before entering the blockchain space, Selina also had experience in investment banking. It was this professional background that prevented her from being overwhelmed by anxiety over liquidations and her friends' madness, helping her drive away the "gambler" within.

On her subsequent journey in contracts, Selina never opened heavy positions again, generally only using 5x leverage, at most 10x, and shifted her main battlefield from OKEx to Huobi, although she was quite dissatisfied with Huobi's frequent outages during significant market fluctuations.

Of course, Selina has also made money trading contracts. In the first half of this year, Bitcoin rose from $3,000 to $6,000. She went long with 5x leverage and closed her position when it reached $9,000, making a small profit, but it still didn't cover the losses from her liquidations.

Now, Selina only occasionally trades contracts in her spare time. "My current habit is to look at short-term trades, either 15 minutes or 2 hours. After all, in this rapidly developing industry, I often get so busy that I forget about my contract positions, and by the time I remember, they've already been liquidated. I've had enough of those losses," Selina admitted.

Whether facing flash crash liquidations, making big profits on the first try, or becoming addicted to contracts, these are just facets of a multifaceted experience. Whether it's Selina, Ke Hua, or Xiao Dan, they all wander along the "gambling table" of cryptocurrency contracts, sometimes reflecting inwardly and sometimes seeking outward.

At the request of the interviewees, all names in this article are pseudonyms.