Correct me if im wrong but in order to open that short he had to move all that bitcoin to the exchange as collateral right. having all your bitcoin on an exchange even for a short time takes balls of steel man some would say its foolhardy
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Not necessarily. It depends how leverage rate is. You can trade with more amount of BTC for example than you put in, but you have to have sufficient amount to cover possible lose. Some large fluctuation could be painful. :)