Author: Lucas Kiely

Translated by: Felix, PANews

The biggest problem with cryptocurrency is the lack of quantifiable value that traditional stocks possess, making it entirely speculative. Additionally, investors can leverage their trades in some way, leading to the market potentially losing billions of dollars overnight.

Stubborn supporters of the blockchain technology behind the industry argue that the innovative infrastructure of blockchain gives it value. However, there is little evidence to suggest that this translates into real, tangible benefits for token holders.

Professional investors from traditional finance often struggle to adapt to this situation. For tokens, there are no price-to-earnings ratios to reference, no supply chains to trace, and in fact, there is nothing tangible at all. This is what makes cryptocurrency unique compared to all other asset classes: it is entirely driven by sentiment—and often by sentiment that is extremely difficult to predict.

Cryptocurrency is a true reflection of free market forces. Bitcoin may be the only exception, as its supply is limited and its ownership is increasingly dominated by complex institutional investors. However, the way most cryptocurrencies rise and fall is extremely difficult to predict, primarily driven by traders.

Confidence, Channels, and Infinite Leverage

One might argue that the valuations of many stocks are also not based on actual value. Indeed, tech stocks like Apple, Meta, and Nvidia have long been highly valued. However, aside from their high price tags, these companies still have some fundamentals to rely on: earnings, cash flow, supply chains, and products. Most digital assets do not have these.

At the same time, cryptocurrency can deliver life-changing returns, and it is indeed possible to achieve this. Seeing these success stories permanently recorded on the blockchain and widely disseminated on social media means that no investor can ignore this market, which has now reached a scale of $4.3 trillion. However, in this largely unregulated crypto world, investors often behave irrationally and make significant mistakes.

These mistakes often manifest in the form of leverage. Of course, leverage is not a new concept in the investment field. Retail investors can also use leverage in traditional finance, but this is regulated. For example, the Financial Industry Regulatory Authority (FINRA) in the U.S. sets a leverage limit of 2:1 for retail margin accounts on stocks; forex leverage trading can only be done through professional platforms and is subject to strict limits; and derivatives are primarily aimed at qualified investors.

House of Cards

Meanwhile, in the crypto space, any investor can easily trade with leverage of 100 times or even higher on exchanges. Today, this issue is more severe than ever—because the largest institutions globally are now also involved in the crypto space. This lack of leverage restrictions has led to chain liquidations, often evaporating billions of dollars from the market within hours or even minutes.

Consider the massive liquidation events at the end of September and the beginning of October 2025. In the September liquidation event, over $1.8 billion in leveraged positions were wiped out, while in the October event, over $19 billion in positions were liquidated within just a few hours. Although the true reasons behind the October liquidation event are widely debated, it is evident that when market sentiment reverses, leveraged long positions fall into a chain liquidation trap.

Some savvy traders undoubtedly profited from this volatility. However, most investors were stopped out before they even had a chance to log into their trading accounts. In the crypto space, the losses from these mistakes are far more severe than in traditional finance, as there are almost no rules. When the market direction reverses, these positions collapse like a house of cards, sweeping away billions of dollars.

Smarter, Faster

Cryptocurrency is constantly evolving. Today, the world's most well-known asset management companies are involved, and the regulatory environment is becoming more friendly. However, it still lacks the kind of protective measures that can instantly prevent significant market events from occurring.

This is largely related to the unrestricted use of leverage, unrealistic expectations, and the entry of institutions that can shake the market with a single trade. Every investor must start taking the market more seriously. Those who made millions from Bitcoin are lucky, but far more people have lost money on altcoins like Dogecoin than have profited.

Now, as the industry matures and giants loom, overconfidence and excessive leverage have become significant risks facing the crypto industry. Every investor needs to adopt a more systematic approach to address this reality.

Related: Crypto Trading "Green Paper": The Market "Truth" That Must Be Acknowledged

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