There are actually some cases in which trading on leverage can be quite profitable and no, it's not because you get bigger rewards, the answer is in funding. In particular, negative funding.
Why do coins rise with negative funding?
Usually, there is an on-chain incentive to stake the coin, and people holding the spot version are trying to protect their downside.
This is a good strategy too but it can be expensive and even harder to time than buying and holding for a swing trade.
Instead, look for long opportunities rather than try to hedge the market, which is in itself a slippery art best left for professionals.
Some recent successful examples of low leverage longs.
LUNA from early March has been on a tear in price. Rising from 60 to today’s 115. In spite of the insane fud around the ponzinomics of how UST is collateralized, the market has been driving the price higher. All while holding LUNA on low leverage you would have been collecting sweet sweet funding in the process.
LOOKS is another ponzified altcoin with an interesting history. Created as a gas rebate airdrop for opeansea.io users, LOOKS has a staking program that has yielded returns in the thousands. Great, another leverage altcoin that requires hedging and is trending higher.
What about the liquidation risk?
This is where the optimal position size is important for your portfolio. You need to ensure you are not using more than 1x leverage on your brokerage account and second, the contract is perpetual. Don’t use futures that expire, this will screw up the strategy in a hurry as you won’t get paid and the contract could expire at a loss.
I wrote a bit more detail on the topic in a medium post yesterday while waiting for a flight if you are interested. I just thought it was helpful to show that not all leverage trading is bad and toxic to crypto, there are in fact rather simple and straightforward ways to benefit greatly without taking much risk.
But yeah, most people will blow up on leverage because they are greedy and unwilling to be patient for the right opportunities. For the few that are willing to respect leverage this might be a good strategy to add to the arsenal.
