What happened 

Cryptocurrency markets are having another wild day and there have been ups and downs along the way. Values dropped early in trading on Wednesday only to recover slightly in the morning. 

As of 10:40 a.m. ET, Bitcoin (BTC 1.89%) had traded in a range of $22,779 to as low as $20,071 in the last 24 hours and is currently down 3.9% over that time to $21,247. Ethereum (ETH 1.07%) was on an even wilder ride, seeing a high of $1,266 and a low of $1,013, but it’s down 7.3% in the last 24 hours to $1,113. Dogecoin (DOGE 9.55%) traded as high as $0.0574 and as low as $0.0503 and is currently down 4% at $0.0541. 

So what 

There are a number of factors impacting crypto trading and most of it is bad news. The Celsius Network continues to be in trouble and users still have frozen accounts. That’s causing potential liquidations of leveraged positions and it’s unclear what the solution is. 

At the same time, crypto fund Three Arrows Capital appears to be in trouble as its leveraged positions have come under fire. The company’s founder said the firm is “working this out” but that hasn’t given much confidence to the crypto market. 

In general, leveraged investments in cryptocurrencies have backfired and traders are having trouble unwinding positions. And there’s far more risk in the system than many people thought, sometimes in places they didn’t know to look. 

Now what 

It’s hard to argue against this being a “crypto winter” in many ways and I think leverage once again is the cause of a lot of big losses. The problem in cryptocurrency is that it doesn’t have the same regulations as the banking industry to keep individual investors safe or firms from taking positions they can’t unwind. Right now, those two factors are coming to a head. 

I’m still bullish on cryptocurrency and Web3 in general as a tool for innovation and disruption in technology, but crypto becoming a trading tool with billions of dollars in leverage has led to unintended consequences. Now, the market is seeing massive losses and even retail investors don’t know when the selling will stop. 

I wouldn’t be buying the dip unless you have a very long-term time horizon and are willing to hold until this market turns around. Crypto will be back, but might be under stricter rules around the world and not every cryptocurrency will survive. For the sake of the industry’s health, this shakeout might be a good thing in the long run.