High Risks in Bitcoin-Backed Securities: Volatility and Structural Flaws Raise Red Flags

The Hidden Dangers Behind Crypto-Asset Securitization

Bitcoin-backed financial instruments have surged in popularity, but their underlying risks are now drawing sharp scrutiny from rating agencies. Fitch warns that extreme price swings in the underlying asset can trigger cascading liquidations, significantly amplifying systemic losses.

Three Critical Risks to Watch

• Unpredictable Volatility: Bitcoin has dropped nearly 50% in days, rapidly eroding collateral value.
• Complex Structures: Multi-layered derivatives reduce transparency, making true risk assessment difficult.
• Elevated Counterparty Exposure: Reliance on intermediaries creates vulnerability—if a platform fails, investors may lose everything.

The collapse of major crypto lenders revealed deep flaws in risk and liquidity management. Experts urge conservative leverage and preference for transparent, stress-tested instruments.