I’ve actually never understood why people use leverage in contracts. It just seems so stupid to me. There are implicit leverage options or zero-cost leverage available, but they insist on choosing the way that’s most likely to make them lose.

Leveraging comes with costs. The explicit cost is the constant erosion from funding fees, and the implicit cost is the increased risk of liquidation.

For example, if you go long during a stagnant market, the funding rate for 1x leverage is 1% per month, but when the market moves, you might have to bear a 10% funding cost in a single month. Using higher leverage means even greater costs, and the risk of liquidation increases exponentially with the leverage multiplier.