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Introduction
Former FTX US President Brett Harrison has launched a scathing critique against crypto exchanges offering 1,001x leverage on volatile digital assets, labeling the practice ‘irresponsible’ and a ‘major problem.’ His condemnation comes as he prepares to launch Architect, a new perpetual futures exchange for traditional assets that will enforce strict leverage caps of just 25x maximum. Harrison argues that extreme leverage transforms trading platforms into gambling operations that prioritize liquidation fees over sustainable market development.
Key Points
- Architect exchange will cap leverage at 25x for stable assets and 8x for volatile ones, contrasting sharply with crypto exchanges offering up to 1,001x leverage
- The platform will use stablecoins as collateral but won't list crypto assets, focusing instead on traditional stocks, forex, and metals
- Harrison argues that excessive leverage transforms trading platforms into gambling operations focused on collecting liquidation fees rather than building sustainable open interest
The Perils of Extreme Leverage in Crypto Markets
Brett Harrison, the former president of FTX US, has drawn a clear line in the sand regarding leverage practices in digital asset trading. In exclusive comments to Decrypt, Harrison stated that offering leverage up to 1,001x on volatile crypto assets represents a fundamental breakdown in responsible market practices. ‘I think it’s a major problem. I think it’s irresponsible. It encourages people to blow out their accounts as fast as possible,’ Harrison told Decrypt. His concerns are particularly timely following the October 10 flash crash that saw a record $19 billion flushed from crypto derivatives markets.
Harrison’s criticism centers on what he sees as misaligned incentives in the current crypto derivatives landscape. ‘The point of a derivatives exchange is to allow people to safely and securely, in a long-term fashion, establish open interest,’ he explained. ‘The goal is not to try to blow out accounts and collect liquidation fees. I think that is much more of a gambling platform than an actual futures trading platform.’ This perspective comes from an executive who witnessed firsthand the growth and challenges of crypto derivatives during his tenure at FTX US.
The proliferation of extreme leverage has been particularly pronounced on decentralized exchanges like Hyperliquid and Aster, where users can access 1,001x leverage without completing know-your-customer procedures or risk assessment forms. This stands in stark contrast to traditional finance and centralized exchanges, which typically require extensive documentation and risk verification before granting leveraged trading access.
Architect: A Conservative Approach to Perpetual Futures
Harrison is putting his principles into practice with Architect, his new perpetual futures exchange set to launch in the coming weeks. The platform will take a fundamentally different approach to leverage, capping it at 25x for the most stable assets like the EUR/USD trading pair and restricting volatile assets like Tesla stock to just 8x maximum leverage. This represents a dramatic departure from crypto norms where 100x or even 1,000x leverage has become increasingly common.
Architect will focus exclusively on traditional assets including stocks, foreign exchange markets, and rare metals, deliberately avoiding crypto markets entirely. However, in a nod to crypto infrastructure, the exchange will allow users to utilize stablecoins as collateral. The rollout will follow a phased approach, initially serving institutional clients before opening to retail investors in what Harrison describes as the ‘intermediate future.’
The platform’s design reflects Harrison’s belief in the underlying utility of perpetual futures, which he described as ‘extremely successful and useful’ in crypto markets. Perpetual futures, or ‘perps,’ are derivative contracts with no expiration date that allow traders to use borrowed capital to place leveraged bets on asset price movements. The key distinction lies in how much leverage is appropriate for different asset classes and market conditions.
The Industry Divide: Democratization Versus Irresponsibility
The debate over extreme leverage reveals a fundamental philosophical divide within financial markets. Proponents of high-leverage crypto products argue they’re democratizing access to sophisticated trading strategies previously available only to institutional investors. Gleb Kostarev, co-founder of the Telegram trading app Blum, previously told Decrypt that adding perpetual futures to its platform was a ‘no-brainer’ due to high retail demand. He noted that Blum offers 100x leverage specifically to attract retail traders with smaller portfolios.
This perspective frames extreme leverage as leveling the playing field, giving retail traders tools comparable to those used by hedge funds and professional trading firms. The massive volume in crypto perpetual futures—reaching $1.3 trillion monthly according to DefiLlama—suggests significant market demand for these products despite the inherent risks.
However, Harrison maintains that the current system creates dangerous incentives that ultimately harm retail participants. ‘If the exchange allows for irresponsible leverage and doesn’t have good procedures for backstopping that leverage, then you will end up with liquidation cascades,’ he warned. His comments reference the mechanism where forced liquidations of highly leveraged positions can trigger chain reactions of selling pressure, exacerbating market volatility and potentially causing flash crashes like the recent $19 billion derivatives wipeout.
Notably, major players in the high-leverage space including BitMEX—the Seychelles-based exchange credited with inventing crypto perpetual futures—along with Hyperliquid, Aster, and Blum did not respond to requests for comment regarding Harrison’s statements. This silence highlights the ongoing tension between innovation and responsibility in the rapidly evolving derivatives market.
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