Insight by: Lucas Kiely, CEO of Future Digital
The primary challenge with cryptocurrency is its lack of quantifiable value compared to traditional stocks, rendering it entirely speculative. Additionally, investors can leverage their trades, potentially resulting in colossal losses overnight.
Proponents of the technology assert that blockchain’s groundbreaking infrastructure provides inherent value. However, there is scant evidence that translates into tangible benefits for token holders.
Professional investors transitioning from traditional finance often find this perplexing. Tokens lack a price-to-earnings ratio, a supply chain to analyze, or any concrete assets. This inherent quality sets crypto apart from other asset classes: it is driven solely by sentiment—often unpredictable sentiment.
Cryptocurrency embodies the essence of a truly free market. Bitcoin (BTC) might be the sole exception, given its capped supply and increasing ownership by sophisticated institutional investors. However, the majority of crypto tokens experience volatility that is exceptionally hard to predict, largely manipulated by traders.
Trust, accessibility, and boundless leverage
One could contend that many stock valuations are not firmly rooted in realistic value either. Indeed, tech stocks like Apple, Meta, and Nvidia have seen inflated valuations for some time. Yet, despite lofty price tags, these companies still rely on fundamentals like earnings, cash flow, supply chains, and products—most digital assets lack this underlying support.
Associated: History indicates an impending strong bull market alongside a hard landing
Conversely, crypto promises life-altering returns, and occasionally, those returns are realized. The visibility of these success stories on-chain and across social media platforms compels investment attention toward the now $4.3-trillion market. However, in the largely unregulated crypto space, investors often behave irrationally and make significant errors.
Commonly, this manifests as leverage. While leverage isn’t a new concept in investing, it is regulated in traditional finance. For instance, the US Financial Industry Regulatory Authority limits retail margin accounts to 2:1 leverage on equities; forex trading with leverage is exclusively available through specialized platforms under stringent caps; and derivatives are mostly the domain of qualified investors.
A fragile structure
In crypto, however, any investor can effortlessly trade with 100x leverage or higher through exchanges. Today, this poses even greater challenges, as major institutions are involved in the crypto space. This unchecked leverage leads to cascading liquidations that can erode billions of dollars in market value in mere hours, if not minutes.
Take the mass liquidation event observed at the end of September 2025 and early October 2025. In the former event, leveraged positions exceeding $1.8 billion were obliterated; in the latter, over $19 billion vanished in just hours. While speculation abounds about the true cause of the latter, it is evident that long leveraged positions were ensnared in a liquidation cascade when market sentiment shifted.
While some savvy traders capitalized on this volatility spike, most crypto investors were likely stopped out before they could even access their trading accounts. In the crypto realm, these errors carry more severe consequences than in traditional finance due to a lack of regulatory frameworks. These positions crumble like a house of cards when market trends reverse, taking billions down with them.
Adapting for the future
The crypto landscape is evolving. The world’s leading asset managers are becoming involved, and regulatory conditions are becoming more favorable globally. Nevertheless, it still lacks essential protections to prevent drastic market events from occurring almost instantaneously.
This situation largely results from unrestricted leveraging, unrealistic expectations, and institutions entering the market that can influence prices with a single trade. Every crypto investor must begin to take the market seriously. The individuals who profited immensely from Bitcoin were fortunate; we all know those who suffered significant losses with Dogecoin (DOGE).
Overconfidence—and excessive leverage—pose substantial risks to the maturing industry as major players enter the arena. Every investor needs to adopt a more systematic approach that acknowledges this evolving reality.
Insight by: Lucas Kiely, CEO of Future Digital.
This article is for informational purposes only and should not be considered legal or investment advice. The views expressed herein are solely those of the author and do not necessarily represent the views of Cointelegraph.
