Here's what traders don't get about crypto leverage, according to SBF

The cryptocurrency market is known for its volatility and the high amount of leverage offered to retail traders, but the highest leveraged trades actually have a very limited impact on the market, according to FTX's Sam "SBF" Bankman-Fried. 

The volatile market, which has seen days in which hundreds of thousands of traders have faced liquidations in their futures position, is known for cascading events. During some market drops, liquidations of levered futures positions can exacerbate drawdowns, leading to further liquidations.

On December 4, for instance, there was $1.3 billion worth of long liquidations in bitcoin futures across several venues, according to data compiled by The Block Research. 

Still, Bankman-Fried told The Block in a recent episode of The Scoop that the highest levered trades likely are not having a big impact on these drawdowns. That's because most of those highly levered traders are small. 

"If you have a very big position you're going to be posting substantial collateral on that," he said. "You're not going to have very high leverage on a very high position."

Bankman-Fried went on to explain:

"And what that means is that even the positions that have like moderately high leverage today on FTX, they're small positions ... And I think that is sort of a really relevant part of this and something that frequently gets missed."

The risk, in Bankman-Fried's view, is in the moves of the underlying asset. 

"Where does that leave you? I think where it leaves you is, yeah, you need to have substantial collateral backing large positions, you need to understand volatility of the asset, you need to understand 50% moves have happened before."

Listen to the full interview here.