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
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