kaal:claim:3396522-020

Leverage offered by cryptocurrency exchanges worsens rather than cures the market's illiquidity, because borrowed money rather than genuine demand is driving the price.

Source quote, verbatim

Cryptocurrency exchanges such as Bitmax, Kraken, among others, offer 5-10x leverage for cryptocurrency trades. This exacerbates the problem of illiquidity as borrowed money is driving the price.

From

Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies (2019), IV. Stable Cryptocurrencies, 5. Transforming Cryptocurrency Market Structure, p. 33
https://ssrn.com/abstract=3396522 · source PDF

Cite as

Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies (2019). SSRN: https://ssrn.com/abstract=3396522

Holds when

applies to exchanges offering five to ten times leverage on crypto trades

Classification

failuresupport: arguedfailure: leverage-imbalance-volatilityfamily: liquidity-and-market-structure-failuredefieconomics

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