This article examines the evolving landscape of leverage risks in crypto markets, as highlighted by Compounding Quality’s analysis dated May 18, 2025. The report reveals significant market volatility and financial instability stemming from leverage trends within cryptocurrency exchanges. Key insights: The report underscores increased volatility and potential financial instability tied to leverage activity in the cryptocurrency market. Notably, it highlights Kraken as a major U.S. player driving these trends, with its rigorous approach to compliance for US traders. Furthermore, larger bank’s elevated leverage ratios have contributed to heightened market risk. Kraken is known for enforcing strict requirements on U.S. traders to meet regulatory compliance standards amidst increased scrutiny. Regulatory measures are in place to mitigate the potential negative consequences of leverage trading, such as market sell-offs and cascading price drops. Regulators worldwide are taking steps to enforce stringent oversight on these practices. The impact extends beyond crypto markets with significant implications for traditional financial markets. For instance, institutional activity and shifting market trends are influencing broader financial stability. Notably, the 2022 FTX collapse continues to shape leverage policies in 2025, leading to more robust oversight measures and stricter regulations on leverage trading. Market volatility is expected to increase as a result of these shifts, making effective risk management strategies crucial for both institutions and individual traders in the crypto sector. This report highlights the ongoing impact of historical events like the FTX collapse and its influence on current practices in managing risks within the cryptocurrency market.