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Insight by: Lucas Kiely, CEO of Future Digital
The primary challenge facing crypto is its absence of the measurable value typically found in conventional stocks, rendering it entirely speculative. Furthermore, traders can leverage their positions to the extent that it can obliterate billions in value within a single night.
Passionate advocates of the technology insist that the groundbreaking framework of blockchain is what imparts its worth. Nonetheless, there’s scant evidence that this results in actual, tangible benefits for token holders.
Institutional investors transitioning from traditional finance frequently find this perplexing. There exists no price-to-earnings ratio to observe for a token, no supply chain to scrutinize and, in fact, nothing substantial whatsoever. This characteristic delineates crypto from all other asset categories: It is solely influenced by sentiment — often, unpredictably volatile sentiment.
Crypto serves as a testament to the power of a genuinely free marketplace. Bitcoin (BTC) may be a notable exception due to its capped supply, and increasingly, sophisticated institutional investors are claiming ownership. However, the majority of crypto tokens fluctuate in ways that are exceptionally hard to forecast and are largely driven by traders.
Trust, access, and unrestricted leverage
One could contend that the valuations of numerous stocks aren’t anchored in actual value, either. Indeed, the assessments of tech stocks such as Apple, Meta, and Nvidia have been inflated for quite some time. Yet despite the lofty valuations, companies still possess fundamentals to rely upon: earnings, cash flow, supply chains, and products. Most digital assets lack such fundamentals.
Related: History indicates we’re facing a robust bull market with a challenging landing
Concurrently, crypto offers the potential for life-altering returns, and occasionally, these returns manifest. Witnessing these triumph stories enshrined on-chain and disseminated across social media platforms ensures that no investor can overlook the now $4.3 trillion market. In the chiefly unregulated crypto realm, however, investors often behave irrationally and commit significant errors.
This frequently occurs in the form of leverage. Of course, leveraging isn’t a novel concept in the realm of investments. Retail investors can utilize leverage in traditional finance, but it is regulated. For instance, the US Financial Industry Regulatory Authority mandates retail margin accounts have a 2:1 leverage cap on equities; forex trading on leverage is only offered through specialized platforms with stringent limits; and derivatives are primarily the domain of accredited investors.
A precarious foundation
In the crypto landscape, however, any investor can effortlessly engage in 100x leverage or even higher on exchanges. Now more than ever — with prominent institutions investing in crypto — this poses a significant concern. This unchecked leverage leads to cascading liquidations that erase billions from the digital asset market, often within hours, if not minutes.
Reflect on the widespread liquidation event that occurred at the close of September 2025 and during the onset of October 2025. In the former instance, over $1.8 billion in leveraged positions vanished, while in the latter, over $19 billion in merely hours. Though speculation abounds regarding the real reason for the latter, what is evident is that leveraged long positions were ensnared in a cascade of liquidations when sentiment shifted.
Some astute traders undoubtedly capitalized on this surge in volatility. However, most crypto investors likely found themselves stopped out of their positions before they even had a chance to access their trading accounts. In crypto, such errors are especially damaging compared to traditional finance due to the minimal regulations. These positions collapse like a house of cards when market dynamics shift, taking billions down with them.
Let’s enhance our intelligence, swiftly
Crypto is progressing. We now witness the world’s leading asset managers participating and a significantly more favorable regulatory framework globally. What it still lacks, however, are adequate protections that could avert massive market events in an instant.
This largely pertains to the ability to leverage without restrictions, inflated expectations, and the entrance of institutions that can shift the market with a single trade. Every crypto investor must begin treating the market with greater seriousness. Those who profited millions from Bitcoin were fortunate, and we all know individuals who incurred greater losses on Dogecoin (DOGE) than they documented gains.
Arrogance — and excessive leverage — pose substantial threats to the industry now that it has matured and large players are watching. Every investor needs to adopt a far more methodical strategy that acknowledges this new reality.
Insight by: Lucas Kiely, CEO of Future Digital.
This article is for informational purposes only and should not be construed as legal or investment counsel. The perspectives and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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