Cryptocurrency Measures, US White House Also Takes Action

Ministry of Finance Cryptocurrency Report Early This Month
Consensus on Need to Protect Individual Investors
Multifaceted Review of Risk Factors
Trading Expected to Continue
Spread of Risks in Individual Leverage Investments
Forced Liquidation of 100x Leverage Trades on Asian Exchanges Causes Sharp Decline

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The White House in the United States is reportedly seeking measures to address cryptocurrencies. The current situation, where cryptocurrency investments are heating up and excessive margin trading is causing widespread losses among individual investors, has made it impossible for governments around the world to remain passive.

The Washington Post (WP) reported on the 25th (local time), citing officials, that the White House received a briefing on cryptocurrency measures from Treasury Department officials earlier this month. The White House is said to have conducted a multifaceted review of the risks associated with cryptocurrencies and the need to protect individual investors.

An official explained that the White House's stance on cryptocurrencies is to provide investment guidelines but not to block trading. He said, "We are discussing allowing investors to invest in cryptocurrencies like Dogecoin while implementing cryptocurrency regulations."

One official stated, "We are aware that there are all sorts of abstract and cautionary risks associated with cryptocurrencies, but we are still taking a wait-and-see approach."

The official added that regulatory authorities recognize the need to monitor volatility in the cryptocurrency market but believe that sudden volatility does not pose a threat to the stability of the financial market.

WP noted that while the Treasury Department, Federal Reserve (Fed), Securities and Exchange Commission (SEC), and Consumer Financial Protection Bureau (CFPB) are working on regulations and countermeasures related to cryptocurrencies, the White House is also taking steps to prepare a response.

As cryptocurrencies like Bitcoin experience sharp fluctuations, the need to protect individual investors is growing. Some exchanges allow excessive leverage trading, causing significant losses to investors.

Brian Kelly, CEO of BKCM, criticized in an interview with CNBC that Asian-based exchanges such as BitMEX allow leverage trading up to 100:1. Since investors can invest up to 100 times their principal, a price drop triggers forced liquidation due to insufficient collateral, resulting in severe losses.

There is also analysis that many accounts engaged in margin trading have been liquidated. Cryptocurrency data firm ‘bybt’ reported that margin trading accounts worth $12 billion (approximately 13.5 trillion KRW) were liquidated just last week. The number of these accounts reached about 800,000. Aikrain Research found that $35 billion worth of Bitcoin was traded on the 19th, when Bitcoin plunged 30%. This is analyzed as the highest trading volume ever, with most of it presumed to be forced liquidations.

CEO Kelly said, "Because investors’ liquidation prices tend to be similar, automatic sell orders occur at certain points, causing prices to plummet." Devin Ryan, an analyst at JMP, also pointed out, "Leverage in the cryptocurrency market by individual investors is a factor that further increases market volatility."

Loan services like BlockFi and Celsius, which lend money using Bitcoin as collateral, are also cited as reasons for the sharp volatility. When the collateral Bitcoin price falls, forced liquidation occurs all at once.

This content was produced with the assistance of AI translation services.