Easy
Can we lose more than his investment in crypto?
The simple answer is: in the vast majority of cases, no. When you buy cryptocurrencies or trading with a basic configuration, you cannot find yourself more money than you really deposited. However, there are certain, rarer situations, where losses can exceed what you thought at risk at the start. In this article, we will explain in simple terms why we sometimes hear that we could "lose more than our investment in crypto", and above all, in which cases it can happen.
Table of contents
Can we lose more than his investment in crypto? Classic investment in crypto
The most common way to invest in cryptocurrencies is to buy a certain amount, as we would for stock market stocks. For example :
You deposit € 1,000 on a specialized platform.
You buy € 1,000 Bitcoin (or another crypto that interests you).
If the price of Bitcoin rises, your investment is gaining value. If it drops, you lose value ... but you cannot have a "negative balance".
Clearly, if you have put € 1,000, the worst scenarios is to see your crypto fall at 0 (with Bitcoin it will not happen), and therefore lose your € 1,000. You will have nothing more to the platform.
In this case, it is said that the loss is limited to your starting bet.
Can we lose more than his investment in crypto?
Some articles or videos suggest that you can find yourself more money than you have deposited. How is it possible? This generally comes from the confusion between the different types of trading and the particular situations where the risk increases. The three most common factors are:
The lever (or "lever") effect poorly understood.
Using a special mode called cross margin (cross-margin), which can draw from your other sales.
External problems, such as the bankruptcy of a platform, which can make you lose more than the only "invested" amount in a crypto.
In the sections below, we will detail these notions step by step.
Can we lose more than his investment in crypto? The lever effect
General principle
The lever effect is a mechanism that allows you to borrow money from the platform to increase the value of your position. For example :
You have 100 € on your account.
You decide to apply a X5 lever (pronounced "times 5").
Your position then has the power of € 500 (€ 100 x 5).
Consequences on your earnings and losses
If the crypto price you bought increases by 10 %, you earn € 10 % of € 500, or € 50. Without lever, you would have won € 10.
If the price drops by 10 %, you lose € 50, so half of your capital (since you only had € 100).
The lever amplifies both gains and losses. To prevent you from falling into a negative balance, the platforms close (or "liquidate") automatically your position when you are about to lose your € 100 departure.
Automatic liquidation: integrated safety
When the loss reaches a certain threshold (sometimes 80 % to 100 % of your € 100), the platform stops the position of authority.
You lose your 100 € initially deposited for this position, but you do not have any additional money to the platform.
This is why, in a classic and well configured use, you cannot lose more than your investment in the event of a market fall. Your loss remains limited to the amount you have put into play.
Can we lose more than his investment in crypto? Isolated mode vs cross mode (cross-margin)
To limit the risks, there are two major "margin" modes on trading platforms: isolated mode and cross mode (also called "cross-margin").
Isolated fashion (isolated margin)
Here, you decide that a specific sum (for example € 100) is assigned to the position you open.
If everything goes wrong, the maximum loss will be this 100 €.
Your total balance on the platform is never used to cover the loss.
Cross mode (Cross-Margin)
Your other sales on the platform can be used to mop losses.
For example, you had 100 € to trade, but also € 500 side (maybe waiting for another purchase), the cross mode can draw from these € 500.
You thought you only invest € 100, but you can ultimately lose all your money if the market drops too fast.
Important: even in cross-margin, you do not normally end with a negative account, but you can lose much more than the 100 € that you had mentally allocated to this operation, because the platform will “use” in the rest of your available funds.
Can we lose more than his investment in crypto? When can we really lose more than its total deposit?
Almost impossible situation in normal mode
On large crypto platforms (Binance, Bybit, Kraken, etc.), with basic parameters (isolated fashion), it is considered almost impossible to finish with a less than zero balance. Automatic liquidation activates before exceeding your bet.
Rare bankruptcies and dysfunctions
In extreme or very rare situations, we can hear about cases where investors found themselves indebted. For example :
Flash crash (ultra -fast price fall) preventing the platform from liquidating positions at the right time.
Technical bugs or major purlins of the platform.
Bankruptcy of the platform at a time when the open positions are under heavy losses, if the management of liquidations is not done correctly.
These cases remain extremely marginal. In the vast majority of cases, especially if you are a beginner and you use a recognized service, you are not supposed to find yourself in the duty of more money.
Can we lose more than his investment in crypto? The question of platform bankruptcy
Here, we are not talking about “losing more than your bet” by contracting a debt, but rather of “losing more than the amount you think”. For example :
You deposit € 5,000 on a platform.
You only use € 1,000 to buy a crypto, and you leave € 4,000 on a stand-by (in the platform case) while waiting for another opportunity.
If the platform goes bankrupt without the possibility of withdrawal, you can lose everything, including the € 4,000 that you had not yet invested.
So you lost “more than your crypto” (which was € 1,000), because you thought you’ve risked only this amount, but you actually still had a lot of money parked on the platform.
Can we lose more than his investment in crypto? How to avoid unpleasant surprises?
1. Check the margin mode
If you are on a trading platform, be sure to be in isolated mode if you are starting out and you do not want to risk your other sales.
2. Do not leave too much "pending" money
If you have large amounts available, it is better to keep them on an wallet (often called “wallet” or “cold wallet”) to avoid concerns in the event of bankruptcy of the platform.
3. Choose reliable platforms
Favor renowned sites or applications, present on the market for a while and which regularly publish information on their reserves and their financial solidity.
4. Find out about the lever effect
Even if you are not going to contract superior debts to your deposit, the lever effect quickly amplifies the losses. A market movement of -10 % can make you lose all of what you have put for this position.
5. Monitor the volatility of cryptos
Cryptocurrencies can highly go up or descend in record time. The more “small” or unknown an asset, the greater the risk of violent movements. With an X10 lever on an ultra volatile crypto, you can be liquidated in a few minutes, which is often synonymous with total loss (of the sum put into play).
Concrete examples for a beginner
Example A: the isolated mode in clear
You have € 200 available.
You open a position by betting these 200 € on Bitcoin, with an X2 lever.
If the market decreases a lot, you can lose everything, but as soon as your 200 € is about to be exhausted, the platform closes the office position.
You do not end up with a balance of -10, -50 or -100 €.
Worse scenario: you fall back to 0.
Example B: Cross margin (cross-margin)
You have € 1,000 on the platform, but you only want to do a € 100 test.
Without knowing it, you let the “Cross-Margin” mode activate.
If your position loses value too quickly, the platform can start to draw from the remaining € 900, in order to support the position.
Result: you potentially lose € 1,000 and not just the 100 € you thought you play.
You stay at 0 € in the end (no debt), but you have “lost more” than what you thought to engage (100 €).
Example C: the bankruptcy of the platform (already mentioned above)
Conclusion: can we lose more than his investment in crypto?
In standard configurations and on most large platforms, no. The liquidation mechanisms are designed for a position to be cut before you accumulate debts beyond your bet. However, some special cases can cause higher losses than you have considered:
The cross mode (cross-margin) can suck your entire balance, not just what you planned to risk.
Simps pending on the platform (not invested) may disappear in the event of bankruptcy.
In very rare situations (technical flaws, market which suddenly collapses), a negative balance can occur, but it is extremely uncommon.
Ultimately, the idea that one can “duty of money” to the platform by exceeding its initial capital is more a myth than a reality for a beginner who uses a simple trading mode (normal lever, isolated position, solid platforms) or just a classic purchase. On the other hand, a lack of vigilance on the type of margin or on the reliability of the site can cause losing “more than expected” from a personal point of view, especially if you have deposited much more than the amount that you really want to invest . To invest in cryptocurrencies in a calm way:
Learn the basics (difference between isolated and crusaders, how liquidation works).
Secure your funds (private portfolios, recognized platforms).
Stay realistic on the high volatility of the market.
In this way, you will protect yourself against most disaster scenarios and you will avoid large disillusions.
Investments in cryptocurrencies are risky. Crypternon could not be held responsible, directly or indirectly, for any damage or loss caused following the use of a property or service put forward in this article. Readers must do their own research before undertaking any action and investing only within the limits of their financial capacities. Past performance does not guarantee future results. This article does not constitute an investment advice.
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Yohan Uzzan
Training engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future ahead of it, I participate in its democratization by developing Crypternon.
