# kaal:claim:3396522-020

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

**Type.** failure  **Support.** argued

**Holds when.**

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

**Source quote.**

> 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, page 33

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

**Verify.** sha256 of source PDF `ef5031b16aa53476ed618f0bdf92601cd4affb893692c701134bd9cba3ea8acf` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Calcaterra%20et%20al.%20-%202019%20-%20Stable%20Cryptocurrencies.pdf

**Failure mode.** leverage-imbalance-volatility  (family: liquidity-and-market-structure-failure)

**Topics.** defi, economics

**Keywords.** leverage, volatility, liquidity, market-structure, speculation

**Canonical form.** This markdown file is the canonical hashed representation of the claim. Its sha256 is the content hash used for attestation.