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If I invest 100usd in BTC and let's say BTC went down next down by 200. What will happen? Would I only lose my 100 usd? OR, I also owe another 100usd? If anyone can explain. NOTE: Super new in investment world. Thank you.

haris baig
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  • At an exchange rate (price of 1 BTC in $) of 47500, $200 buys you 200 / 47500 = 0.0042105263157895 BTC. If the exchange rate falls 200 then at an exchange rate of 47300, your 0.0042105263157895 BTC buys you 0.0042105263157895 * 47300 = $199.16. – RedGrittyBrick Feb 12 '21 at 12:41

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You have 100 USD. The current BTC price is 40000 USD/BTC.

You buy 0.0025 BTC. This costs you 0.0025 BTC * 40000 USD/BTC = 100 USD. You now have 0 USD and 0.0025 BTC. You don't owe anybody anything.

Time passes, as long as you want. You can stop here, and just hold on to your BTC for eternity. You don't owe anybody anything.

The BTC price changes to 39900 USD/BTC. You still have 0 USD and 0.0025 BTC. You don't owe anyone anything. In fact, you didn't even lose anything - you have exactly the same as what you had before, only it is now worth a bit less when expressed in USD.

Now you decide to sell your 0.0025 BTC. This earns you 39900 USD/BTC * 0.0025 BTC = 99.75 USD. You now have 99.75 USD and 0 BTC. You still don't owe anyone anything. You lost 0.25 USD compared to what you had before buying, but no matter what the USD/BTC exchange rate does, it won't go negative.

As long as you don't borrow anything for anyone, you never owe anyone anything.

PS: Nothing here is specific to BTC. It applies to anything you could buy and resell later for a different price. If the price goes up and you sell, you win. If it goes down and you sell, you lose. Under no circumstances (*) will you ever owe somebody something because the price goes down; you'll just end up with less.

(*) This isn't true in some financial constructions (margin trading). Don't worry, if you were using these, you'd know.

Pieter Wuille
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    Even when "it is now worth a bit less when expressed in USD." it might simultaneously be worth a bit more when expressed in hamburgers, Ferraris or Yen. Dollars are subject to inflation that, over a long period, generally devalues dollars. The long term trend over decades is for $100 to become worth less and less. The opposite is true for 0.0025 BTC. Just a thought. – RedGrittyBrick Feb 11 '21 at 10:44