## Market correction or the beginning of a crisis? How proactive cryptocurrency policies pose new threats

This year, the dynamics around the digital assets sector have reached a critical point. The change in authorities' stance on cryptocurrency regulation has opened the door for a wave of new enterprises that have begun aggressively accumulating digital resources. However, investor enthusiasm is now colliding with harsh realities – increasing losses and warning signs of system instability.

### From fever to madness: companies amass digital assets on an unprecedented scale

The surge of new companies investing in digital resources began to accelerate this spring. The model is simple this time: a publicly traded company changes its strategy, announces accumulation of bitcoin or ethereum, and then attracts hundreds of millions of dollars from wealthy investors seeking exposure to the cryptocurrency market.

The term "treasury companies" has appeared everywhere – nearly half of the newly formed entities focus on bitcoin holdings, while others announce plans to purchase lesser-known coins. Industry estimates suggest that these new entities already plan to incur over $20 billion in debt to finance these acquisitions.

The story of Allan Teh from Miami illustrates the gamble inherent in this strategy. This year, he invested $2.5 million in a publicly traded company that shifted its business profile to digital asset accumulation. The shares rose to nearly $40 each. However, when the cryptocurrency market crashed, the same security fell to $7. Within just a few weeks, Allan Teh lost about half of his investment.

"Everyone thought the strategy was foolproof back then," recalls Teh. "Now I’m panicking, wondering if I can get out without losses."

Regulatory institutions are watching this expansion with growing concern. The chairman of the securities oversight commission recently admitted: "Of course, we are very worried about this. We are closely monitoring the situation."

### Leverage: a car without brakes

The most serious threat, however, comes from the invisible dimension of this market – trading with leverage. Investors can use their assets as collateral to borrow and increase their exposures. In the third quarter of the year, the total value of loans in the digital assets market reached a record $74 billion – an increase of $20 billion just in the third quarter.

Until recently, 10x leverage trading mainly took place on risky markets. In July this year, the largest US trading platform announced the introduction of a tool allowing investors to bet on bitcoin and ethereum contracts with 10x leverage. Previous regulatory guidelines limiting such transactions were withdrawn.

The October market crash, known as a "flash crash," demonstrated the scale of this risk in a dramatic way. That evening, when prices of electronic coins plummeted sharply, forced liquidation of positions worth at least $19 billion occurred – affecting 1.6 million traders. Derek Bartron from Tennessee describes his situation: "I wanted to close my positions and get out, but I had no way to do so. In fact, the main platforms blocked access to user funds."

Bartron lost about $50,000 because he couldn't close his trades in time.

"Leverage is the main cause of financial crises," warns a former advisor to the oversight commission. "And the current market generates a huge amount of such leverage."

( Asset tokenization: expanding risk to the real economy

Meanwhile, the most ambitious projects in the cryptocurrency industry are heading toward a new frontier – tokenization of real assets. This involves creating digital equivalents of stocks, three-month bonds, real estate, or even oil fields.

Pioneers of this movement, such as the founders of the startup Plume, are working on legalizing the trading of tokenized securities in the United States. They have already met with the oversight commission, prepared reports for the White House, and opened an office on the top floor of the famous New York building. Their argument is compelling: electronic securities can operate 24/7, are more transparent, and more efficient than traditional systems.

However, warnings come from an unexpected direction. Central bank economists warn that the spread of tokenization could transfer risk from the digital assets market to the entire financial system, "weakening policymakers' ability to maintain payment infrastructure stability."

Access to three-month bonds, traditionally seen as a safe instrument, through cryptocurrency platforms sets a risky precedent – mixing conservative financial instruments with the notorious volatility of electronic assets.

) Business and government ties: the gray zone blurs

A peculiar aspect of this expansion is the deep entanglement of new entities with the ruling family of the country. The startup World Liberty Financial, founded by family members of the country's leader, entered into a partnership over a year ago with the publicly traded company ALT5 Sigma – involved in collecting tokens issued by World Liberty Financial.

The agreement states that for each transaction, business entities connected to the ruling family receive a commission. This intertwining of business and government interests is facilitated by the current deregulatory atmosphere.

ALT5 Sigma began to falter quickly. In August, it was revealed that one of its subsidiary directors was involved in money laundering, and the management is conducting an investigation into other serious irregularities. Since August, the stock has fallen by 85 percent.

### The paradox of regulation: leniency instead of oversight

The securities oversight commission – an institution that has fought lengthy legal battles with the cryptocurrency sector – is now changing course dramatically. This year, it established a special working group that has already held dozens of meetings with companies seeking regulatory support for new products.

The new chairman of the commission openly supports tokenized securities, calling them a "technological breakthrough" and declaring a commitment to support the industry.

This shift in orientation is complete. While traditional regulators and leaders of old financial institutions express concerns about the spread of systemic risk, federal authorities are accelerating the legalization process. The boundaries between speculation, gambling, and investing – as one former expert says – are becoming increasingly blurred.

### Threats balance: from private losses to systemic crisis

Individual investor losses are just the beginning. The real problem lies in the scale of interconnectedness between markets. When publicly traded companies have direct exposure to digital assets, and institutional investors trade tokens of traditional securities, even minor disruptions in the electronic coin market can spread across the entire financial ecosystem.

It is also significant that many new ventures were created in haste, with management teams lacking experience in running large corporations. These companies are taking on huge debts to finance accumulation. If the next flash crash accelerates the liquidation of collateral, the domino effect could be catastrophic.

The White House leader emphasizes that policy supports innovation and creates economic opportunities for Americans. Industry leaders in cryptocurrency argue that volatility is an opportunity, and risk always accompanies high returns.

Nevertheless, the market still faces a fundamental question: does enthusiasm for digital innovation conceal more systemic errors than solutions?