Comment: The Dalian tragedy is a warning to "contract casinos"

Everyone cheered as Bitcoin climbed to $24,000, but the life of this three-year-old girl seemed to have been forgotten.

In this shocking case of killing his daughter and then committing suicide with his wife in June, as the live broadcast of the trial was made public, we found that the Dalian man, Zheng Dawei, was a Bitcoin contract gambler. Zheng Dawei's daughter's life was frozen at the age of 3 years and 2 months, and she didn't even have a birthday cake.

Some netizens revealed that Zheng Dawei made a lot of money in 2017, but he lost money and borrowed a lot of money. Someone in his circle of friends lent him 1.5 million, 1 million, and 300,000 yuan and never paid it back. During the trial, Zheng Dawei said that he lost more than 20 million yuan in Bitcoin trading, 500,000 yuan from his wife, 3 to 4 million from his parents, and the rest from savings from "speculating in digital currencies" and loans from relatives and friends.

Bitcoin is currently in a bull market and has just broken through 24,000 US dollars. At any point in time after Zheng Dawei made a profit in 2017, whether he held or bought spot Bitcoin or purchased mining machines, he would have retained and made considerable profits.

The only thing that can burn 20 million in Bitcoin is a contract.

The Chinese missed out on DeFi, but are making great strides in the contract field. According to SKEW data, the top four Bitcoin contract trading volumes are all from China (or founded by Chinese). The top three are naturally the three well-known exchanges, and the fourth is this year's upstart Bybit, whose contract trading volume has exceeded that of BitMEX, which it once imitated.

Binance CEO Zhao Changpeng once said: The number of users in the cryptocurrency circle is insufficient and the depth is insufficient, which leads to great risks in contract trading and frequent liquidations. Therefore, Binance does not touch the contract trading business in order to protect the interests of Binance investors.

Today, Huobi and Binance have invested heavily in the contract market, surpassing the old contract exchange OKEx. Huobi's 24-hour contract trading volume has reached 2.4 billion US dollars. Their leverage ratio is as high as 125 times, so a loss of 20 million is not surprising.

However, the main contract traders of these four major exchanges are institutions, and the preferential policies for retail investors are limited, and they will warn of risks as much as possible. Outside the mainstream exchanges, the "gambler model" of small and medium-sized exchanges + teachers who guide orders + retail investors is quietly spreading in China like a flower of evil.

X, B, C, M and other exchanges are known as the local contract kings. They cooperate with "order teachers", and 70% or even 100% of the handling fees are handed over to order teachers. They use WeChat, QQ, etc. to attract retail investors, and then manipulate K-line to complete the harvest with themselves as counterparties. The leverage ratio can be as high as 500 times. Many users were surprised to find that when they made money, the exchange would use the excuse of risk control to prevent withdrawals; once the profits were lost, withdrawals returned to normal.

In fact, in the regulatory frameworks of various countries/regions, derivatives are treated with extreme caution, and most of them will stipulate the leverage multiples of derivatives. For example, Japan limited it to 4 times in 2018; it takes 5-6 years to apply for a cryptocurrency derivative brand license in the United States; Hong Kong only allows professional investors and institutional investors (individuals with more than 8 million Hong Kong dollars and institutions with more than 40 million Hong Kong dollars) to trade cryptocurrencies.

Some people argue that gambling is part of human nature, and where there is demand there is supply; gambling scenarios outside of Bitcoin contracts abound; tragedies are just isolated cases, and most people only use gambling as a means of entertainment or investment.

This statement ignores two points. First, human nature has both good and evil, and marketing gambling contracts to retail investors is to provoke the evil of human nature; second, people are very different in strength, and the exchange itself is the counterparty, professional quantitative institutions, and project parties/exchange insiders who have access to insider information are actually hunting down retail investors.

If the name of the exchange where Zheng Dawei traded the contract is disclosed in the future judgment documents, it may cause a huge shock in the industry. With the surge of public opinion, it is not impossible for the regulators to crack down again. Wu Blockchain suggested that the four major mainstream contract exchanges should take the initiative to prohibit providing high-leverage contracts to retail investors, or strictly cap the amount of funds.

Perhaps similar tragedies will happen again, but we can put more obstacles on the road to hell.

Reference: Court trial video revealed: Dalian man claims to have lost 20 million yuan in Bitcoin investment and takes his wife and daughter with him