The head of digital assets at BlackRock has expressed concern that excessive speculation on cryptocurrency derivatives platforms is causing extreme volatility in Bitcoin prices, undermining its reputation as a stable hedge asset. He noted that most investors are using leverage, or borrowed funds, to trade, which amplifies price fluctuations and damages Bitcoin’s credibility. Bitcoin, the world’s oldest and most well-known cryptocurrency, has traditionally been viewed by investors and analysts as a safe haven during financial market uncertainty. However, the rise of crypto derivatives and leveraged trading in recent years has challenged this perception by triggering unpredictable price swings. Crypto derivatives are financial instruments based on the prices of Bitcoin and other cryptocurrencies, and high leverage magnifies both profits and losses for investors. Sudden market moves in this environment cause instability, weakening Bitcoin’s status as a stable asset. BlackRock, the world’s largest asset management firm, is expanding its presence in the cryptocurrency sector, and this warning from its digital assets chief signals a need for stronger market infrastructure and regulatory frameworks to maintain investor confidence and restore Bitcoin’s hedge asset reputation. While volatility is common in crypto markets, rising leveraged trading activities increase risks and could negatively impact overall market health. Experts emphasize the importance of effective regulations and transparency to manage these risks.
Source: coindesk
