‘Bitcoin is not an asset that is designed to be leveraged,’ says Caitlin Long

Published at: June 14, 2021

All eyes are on Bitcoin (BTC), with the largest cryptocurrency shooting up past $40,000 on Monday. Unsurprisingly, the price increase happened shortly after Tesla CEO Elon Musk tweeted that the electric-car company would potentially accept BTC payments once more miners confirm green energy initiatives. 

Yet, while Musk’s tweet may have driven the price of Bitcoin up, some industry experts believe that Bitcoin is not a cryptocurrency that should be leveraged. For example, during an exclusive interview with Cointelegraph at Bitcoin 2021 in Miami, Caitlin Long, founder and CEO of Avanti Financial, said that unlike other cryptocurrencies, solvency matters more than leverage and liquidity when it comes to Bitcoin:

“Once you get into Bitcoin and you start losing money, I consider that to be really valuable tuition for really learning what Bitcoin is. We've got a lot of new people in this industry now who are going through those lessons, and hopefully, folks will learn from them. Especially in this bull market, there's been so much leverage added to the system. For those of us who've been around a long time, we’ve learned these lessons a long time ago — you don't leverage Bitcoin.”

A regulatory push for Bitcoin and stablecoins

In addition to advising that Bitcoin shouldn’t be leveraged, Long mentioned that there are new regulations for Bitcoin coming out of Washington, DC — something she believes has been coordinated with other government bodies. “It was Ray Dalio who said that Bitcoin's biggest threat is success — because that means the regulators are going to be cracking down,” said Long.

Although this may be, Long pointed out that regulations will not ban Bitcoin or other cryptocurrencies, as long as users comply. She said:

“The punchline is that if you pay your taxes and you get regulated, and you don't take shortcuts, you're going to be okay. Those that are trying to commit crimes, or defraud consumers, or not pay taxes and not comply with the law, then those people are not going to be okay.”

Long also noted that regulations around stablecoins are a priority for lawmakers. In particular, this will ensure that stablecoins don’t infect the U.S. dollar payment system with liquidity risk. To put this into perspective, Long mentioned the accidental hard fork that happened for a few hours on Ethereum during November 2020, saying:

“At the time, I was thinking, 'What would happen if all the Ethereum ERC-20 stablecoins had to be redeemed within the span of minutes because they had to be burned on one fork and reissued on another?' That is not a risk that the traditional financial system has been thinking about.”

Moreover, Long commented on the risks associated with stablecoins back in May, warning that the entire stablecoin market has the potential to bring down other tokens upon a credit market correction.

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