Cryptokurtosis: frequent trading fuels higher losses

<jats:p>We assess the impact of cryptocurrencies ultra-high frequency trading on financial stability. Focusing on three well-established cryptocurrencies, namely Bitcoin, Ethereum and Sui, we show that as the trading frequency increases, so do the excess potential losses of the investors, over and above the anticipated losses based on the Value-at-Risk. This is led by the exponential growth of the kurtosis that is exhibited at high-frequency trading. Given that currently the minimum capital requirements do not differentiate between the trading frequency but only between the type of crypto assets groups, we show that such overlook poses a threat to the financial stability.</jats:p>