Crypto Needs Rules

The cryptocurrency market still operates without a well-defined set of rules — and according to economist Alex Krüger, that’s exactly why price crashes are becoming more frequent and more severe. The expert believes that digital asset exchanges should be supervised much like the New York Stock Exchange (NYSE).

In traditional finance, there are so-called market makers — firms responsible for maintaining market liquidity, meaning they must ensure trading remains possible even in volatile times. They’re required to continuously post buy and sell offers, and if they fail to do so, they can face penalties. This structure keeps markets stable, even during sharp price swings.

The crypto world works differently. Liquidity providers have no legal obligations. When panic hits and prices start to plummet, they often just pull out of the market entirely. With no buyers or sellers left, prices fall even faster. Krüger argues that this lack of rules is the main reason cryptocurrencies can lose value so dramatically in such a short time.

Tony from Pelion Capital shares a similar view but points out that traditional stock exchanges protect investors with special safeguards. When prices drop a few percent, trading is automatically halted — a mechanism known as a “circuit breaker.” It gives investors time to regain composure and prevents panic selling. Tony emphasizes that if crypto exchanges are ever required to maintain liquidity, they must also adopt similar safety measures.

Not everyone agrees with importing ideas from traditional markets. Some in the industry insist that cryptocurrencies should remain free from such regulation. However, recent events have shown how costly the lack of oversight can be. Within just a few days, the total market value plunged by over $400 billion, and hundreds of thousands of investors lost their funds due to excessive leverage. Bitcoin fell more than 7% in a week, and Ethereum dropped nearly 13%.

Krüger concludes that until the crypto market establishes some basic rules and safety systems, investors should be prepared for more violent downturns ahead.