Brett Harrison, the former President of FTX US, has issued a stark warning regarding the pervasive nature of leverage trading in the cryptocurrency market, labeling it a “major problem.” Speaking from a position of intimate knowledge of both the successes and spectacular failures within the digital asset space, Harrison’s comments on November 1, 2025, resonate deeply across an industry still grappling with the fallout of past excesses. His pivot to launching a perpetual futures exchange for traditional assets, specifically designed to avoid crypto risks, underscores a growing conviction among seasoned players that the industry’s reliance on high leverage poses a persistent and potentially systemic threat to its long-term stability and broader institutional adoption.

The Double-Edged Sword of Leverage

Leverage, fundamentally, allows traders to control a larger position with a relatively small amount of capital. While this can amplify returns, it equally magnifies losses. In the fast-paced, 24/7 crypto markets, this mechanism has historically led to dramatic liquidation cascades, turning minor price corrections into full-blown market downturns. Harrison’s experience at FTX likely provided a front-row seat to how rapidly over-leveraged positions can unravel, triggering a domino effect that impacts not just individual traders but the entire ecosystem.

• Amplified Volatility: High leverage can exacerbate price swings, leading to increased market instability.
• Liquidation Cascades: Forced selling of leveraged positions can trigger further price drops, leading to more liquidations.
• Systemic Risk: The interconnectedness of leveraged positions across platforms can pose a risk to the broader market, as seen in previous crypto market downturns.
• Retail Investor Exposure: Often, less experienced retail traders, attracted by the promise of outsized gains, are the most vulnerable to rapid liquidations.

Lessons from the Past: Avoiding Future Pitfalls

The crypto industry has a painful history of leverage-fueled crises. From the collapse of Celsius and Three Arrows Capital in 2022 to various DeFi protocol liquidations, the pattern is clear: too much borrowed capital in volatile markets is a recipe for disaster. Harrison’s move to develop a TradFi-focused platform that explicitly sidesteps crypto risks highlights a growing bifurcation in financial thought. While some embrace crypto’s innovative capital efficiency, others, having witnessed the fragility it can induce, are actively seeking to insulate themselves and their clients from these known vulnerabilities.

His new venture’s focus on traditional assets, with a cautious approach to risk management inherent in established financial markets, suggests a recognition that certain elements of crypto – particularly unchecked leverage – are not yet mature enough for broad, stable institutional participation without significant structural reforms or regulatory oversight. This stance is a strong indicator of how lessons from 2022-2023 continue to shape industry leaders’ strategies in 2025.

Regulatory Imperatives and Market Evolution

Regulators globally have consistently voiced concerns about market integrity and investor protection in the crypto space. The issue of leverage is frequently at the forefront of these discussions. While centralized exchanges have started implementing stricter margin requirements and leverage limits, the decentralized finance (DeFi) sector often operates with far greater freedom, allowing for even higher leverage ratios. This disparity creates a complex challenge for policymakers striving for a level playing field and robust consumer safeguards.

Harrison’s public commentary could serve as a powerful impetus for further regulatory action. It amplifies the argument that for crypto to achieve its full potential as a legitimate financial asset class, fundamental reforms around risk management, transparency, and consumer protection—especially concerning leverage—are paramount. The industry faces a critical juncture: either self-regulate effectively or face increasingly stringent external mandates that could stifle innovation.

Conclusion

Brett Harrison’s unequivocal warning about crypto leverage trading is a timely reminder of the persistent risks inherent in the digital asset market. As the industry matures, the tension between innovation-driven capital efficiency and the need for robust risk management becomes increasingly pronounced. His decision to build a traditional finance platform specifically to avoid crypto’s inherent leverage issues speaks volumes about the challenges that remain. For crypto to truly flourish and attract a broader institutional base, addressing the systemic “major problem” of unchecked leverage, through a combination of technological solutions, industry best practices, and thoughtful regulation, will be absolutely essential for market stability in the years to come.

ADENIYI OLOWOPOROKU