2025 Virtual Currency Risk Assessment Report (Full Version)
1. Report overview#
(1) Assessment background
In 2025, the application of blockchain technology continues to deepen, and the virtual currency market shows a multi-polar development trend. Mainstream coins such as Bitcoin and Ethereum still dominate the market, while emerging crypto assets like Solana and Cardano are rising rapidly. Innovation and speculation related to stablecoins are simultaneously heating up. However, behind the market boom lie multiple risks: increasing divergence in global regulatory policies, frequent technical security vulnerabilities, and consistently high price volatility. Coupled with changes in market structure brought about by institutional funds entering the market, the investment risks in virtual currencies are becoming increasingly complex and diverse. This report identifies risk types comprehensively and quantifies risk levels based on market dynamics, regulatory policies, and typical risk events in 2025, providing risk references for investors, regulators, and market participants.
(2) Scope and methods of assessment
- Assessment scope: Covers the full chain of risks in global mainstream virtual currencies (including stablecoins) regarding market trading, technological applications, regulatory compliance, and credit systems, with a focus on new risk points added in 2025 (such as the regulatory classification of stablecoins and the impact of institutional fund fluctuations).
- Assessment methods: A combination of quantitative and qualitative approaches is used. On the quantitative side, tools such as the VaR model, volatility analysis, and stress testing are employed to quantify market risks. On the qualitative side, risks related to technology and compliance are identified through risk matrices, on-chain data monitoring, and reviews of typical cases, combined with assessments from industry experts to form comprehensive evaluation conclusions.
(3) Core conclusion
In 2025, the risk level of the virtual currency market is assessed as extremely high risk, with tightening regulatory policies, extreme market volatility, and technical security vulnerabilities as the three core sources of risk. After stablecoins are explicitly included in the regulatory framework, their compliance and value decoupling risks become more pronounced. Although the market structure led by institutional funds has improved some liquidity, it also exacerbates the systemic transmission of risks. Participation from investors requires the establishment of a strict risk control system, while regulators need to strengthen inter-departmental collaboration and global regulatory cooperation.
2. Market status analysis
In 2025, the virtual currency market continues to expand in scale, but structural differentiation is significant: the market capitalization of mainstream coins exceeds 70%, Bitcoin once broke through the historical high of $126,000 within the year, then significantly adjusted to around $82,000, with a maximum monthly volatility of 41%; emerging coins frequently experience 'sharp rises and falls' due to conceptual speculation, with some small and medium-sized coins seeing over 50% declines in 24-hour trading volumes and prominent liquidity exhaustion issues.
The market participants show 'institutional' characteristics, with the Bitcoin spot ETF bringing in large-scale institutional funds, but retail investors still account for about 45% of the total trading volume. Illegal trading models such as 'follow trading' and 'trusted referrals' are shifting online and becoming more concealed. The stablecoin market has become a new hotspot; after the implementation of the Hong Kong (stablecoin regulations), a licensing system has been established, but illegal fundraising activities using stablecoins as a gimmick have appeared domestically, and mainstream stablecoins like Tether are still facing controversies over the authenticity of reserve assets.
3. Core risk types and in-depth analysis
(1) Market risk: Increased volatility and liquidity crisis
- Extreme price volatility: In 2025, Bitcoin's daily average volatility remains at 5%-10%, more than 5 times that of the S&P 500 Index. On December 7, the daily fluctuation exceeded $10,000, triggering a liquidation of 100,000 people across the network, with liquidation amounts reaching $111 million. Macroeconomic policies (such as expectations of interest rate cuts by the Federal Reserve) and changes in international situations can lead to severe swings in market sentiment, forming a 'double kill' pattern.
- Liquidity stratification risk: The trading depth of mainstream coins is acceptable, but the bid-ask spread of small and medium-sized coins exceeds 10%. In extreme cases, 'inability to close positions' occurs. Some exchanges have been forced to pause trading to cope with volatility, exacerbating investor losses.
- Interlinked transmission risk: The correlation between virtual currencies and U.S. tech stocks and gold has risen to 0.6. Adjustments in Federal Reserve policies and turbulence in traditional financial markets can lead to cross-market resonance declines through the flow of institutional funds.
(2) Regulatory risk: Policy tightening and compliance ambiguity
- Strengthening domestic regulation: The People's Bank of China clarifies that stablecoins are a form of virtual currency and reiterates that related businesses are illegal financial activities. Several departments jointly crack down on concealed transactions, blocking illegal channels such as QR code downloads and social media leads, continuously compressing the survival space for domestic trading.
- Global regulatory divergence: The EU MiCA regulation requires stablecoin issuers to hold sufficient reserves, while the U.S. classifies virtual currencies as 'property' subject to capital gains tax. Hong Kong is implementing a stablecoin licensing system, and differences in policies among countries are increasing the difficulty of compliance in cross-border transactions.
- Compliance execution risk: The FATF 'travel rule' requires exchanges to identify trading counterparts, but the existence of decentralized exchanges and mixing tools makes anti-money laundering regulations difficult to implement. Non-compliant platforms face business restrictions or penalty risks.
(3) Technical risk: System vulnerabilities and security threats
- Underlying risks of blockchain: Smart contract vulnerabilities remain a major disaster area, with over 30 theft incidents globally due to contract bugs in 2025. Some project codes have not undergone third-party audits, the risk of consensus mechanism attacks continues to exist, and the probability of niche coins encountering '51% attacks' is increasing.
- Storage and trading security: Phishing attacks by wallet service providers are frequent, with cases of asset theft due to private key leaks increasing by 15% year-on-year; trading platforms occasionally experience system upgrade errors and server downtimes. In November, a major trading platform suffered technical failures that caused user orders to remain unexecuted, resulting in losses exceeding $10 million.
- Technological iteration risk: Blockchain technology is rapidly updated, and some early-stage coins face the risk of being eliminated from the market due to outdated underlying architectures. Technological upgrades may lead to 'hard forks', causing asset splitting and devaluation.
(4) Credit risk: Frequent defaults and trust crises
- Collapse of exchange credit: Some exchanges have issues such as misappropriation of customer funds and false accounting. In 2025, three small to medium-sized exchanges still went bankrupt due to funding chain breaks, leaving investors' assets unrecoverable.
- Moral hazard in project parties: The ICO model is reviving in disguise, with some projects defrauding investments through false white papers and exaggerating technological applications, rapidly 'running away' after going live, involving amounts up to 2 billion yuan in a single case.
- Stablecoin value decoupling: Algorithmic stablecoins frequently encounter 'explosions' due to failures in their pledge mechanisms, and some fiat-collateralized stablecoins face insufficient reserve asset issues. In times of market panic, concentrated runs can easily occur. In 2025, a new stablecoin's price dropped from $1 to $0.3, triggering a chain sell-off.
(5) Systemic risk: Cross-market transmission and financial stability
- Institutional risk spillover: When crypto hedge funds and banks holding virtual currencies experience debt defaults, the impact may transmit through the debt chain to the traditional financial system. In 2025, the bankruptcy of a crypto company led to losses in associated bank wealth management products.
- Liquidity crisis spreading: Traditional financial events such as the bankruptcy of Silicon Valley Bank have led to the freezing of deposits by crypto companies, resulting in stablecoin decoupling and liquidity tightening at exchanges, creating a cycle of 'traditional financial risk → crypto market turmoil → risk reverse transmission'.
- Market monopoly risk: The market concentration of leading coins and exchanges exceeds 60%. Problems with a single entity may trigger systemic turmoil in the entire market, exacerbating market fragility.
4. Risk quantification assessment
(1) Standards for risk level classification
Risk level Occurrence probability Impact degree Quantitative indicator reference
Extremely high risk High (>30%) Major (losses exceeding 50%) VaR (95% confidence level) >10%
High risk Medium (15%-30%) Major VaR (95% confidence level) 5%-10%
Medium risk Medium (15%-30%) Moderate (losses 10%-50%) VaR (95% confidence level) 3%-5%
Low risk Low (<15%) Slight (<10% loss) VaR (95% confidence level) <3%
(2) 2025 core risk quantitative results
- Market risk: Extremely high risk, with a 1-day 95% VaR of 8.7%. Stress testing shows the maximum potential loss of asset portfolios can reach 65% under extreme scenarios.
- Regulatory risk: Extremely high risk, with a 35% probability of trading interruptions due to tightening policies, and an average loss exceeding 40% caused by compliance penalties.
- Technical risk: High risk, with a 28% annual occurrence probability of security incidents, and an average loss rate of 32% per incident.
- Credit risk: High risk, with a 22% probability of counterparty defaults and an average recovery loss rate of 58%.
- Systemic risk: Medium risk, with an 18% probability of cross-market transmission, and a 12% probability of affecting the entire market.
5. Analysis of typical risk event cases
(1) Case 1: 2025 November stablecoin speculation fraud case
- Incident overview: A criminal gang issued 'cross-border payment stablecoins' under the guise of a licensed institution in Hong Kong, attracting investors with a '30% annual return' gimmick. The amount involved reached 1.2 billion yuan, ultimately collapsing due to the absence of actual asset collateral.
- Risk types: Credit risk, compliance risk.
- Insight: After the regulatory classification of stablecoins, vigilance is still needed against fraudulent activities that use 'compliance' as a guise. Investors should verify the licensing qualifications of issuers and proof of reserve assets.
(2) Case 2: The extreme volatility liquidation event of Bitcoin in December 2025
- Incident overview: Influenced by expectations of interest rate cuts by the Federal Reserve, Bitcoin dropped from $90,000 to below $89,000 on December 7, with a 24-hour trading volume halving and a network-wide liquidation amount of $111 million, leading to significant losses for some leveraged investors.
- Risk types: Market risk, operational risk (high leverage).
- Insight: High leverage trading amplifies market volatility risks. Investors need to control leverage ratios and set strict stop-loss mechanisms.
(3) Case 3: 2025 theft case due to vulnerabilities in a trading platform's smart contract
- Incident overview: A major trading platform's derivative contracts had code vulnerabilities that were exploited by hackers to steal $80 million worth of crypto assets, leading the exchange to suspend withdrawals for 3 days due to compensation pressure.
- Risk types: Technical risk, credit risk.
- Insight: Project code audits and security testing are key to risk prevention. Investors should prioritize selecting trading platforms that are technically compliant and have robust risk control.
6. Risk response strategies and recommendations
(1) Recommendations for investors
1. Uphold the bottom line of risk: Clearly define virtual currency investment as a high-risk behavior, participate only with idle funds, not exceeding 5% of total personal assets, and eliminate leveraged trading and debt investment.
2. Strengthen compliance awareness: Stay away from illegal trading platforms within the country, do not participate in 'proxy investment', 'follow trading', and other activities, and be wary of speculation traps involving stablecoins, AI + blockchain, and other concepts.
3. Implement technical protections: Choose open-source projects that have undergone third-party audits, use hardware wallets to store assets, regularly change passwords, and avoid clicking on unfamiliar links that may expose private keys.
4. Build a diversified portfolio: Avoid investment in a single coin, controlling the allocation ratio of mainstream coins to emerging coins at 7:3 to reduce non-systemic risks.
(2) Recommendations for market participants
1. Exchanges: Fulfill the primary responsibility for technical security, regularly conduct code audits and stress tests, establish customer fund isolation mechanisms, and actively cooperate with anti-money laundering regulatory requirements.
2. Project parties: Strengthen information disclosure, publicly disclose core contents of white papers and code audit reports, do not exaggerate technological applications and profit expectations, and ensure investors' right to know.
3. Intermediary institutions: Conduct services in compliance, do not provide support for illegal trading, and enhance investor risk warnings to eliminate false advertising.
(3) Recommendations for regulatory agencies
1. Improve the regulatory framework: Clearly define the legal status of virtual currencies and related derivatives, issue targeted regulatory rules, and close regulatory loopholes in emerging areas like stablecoins.
2. Strengthen collaborative law enforcement: Establish cross-departmental and cross-regional regulatory cooperation mechanisms to combat cross-border illegal trading, money laundering, fraud, and other activities, and to clean up concealed trading channels.
3. Strengthen investor education: Publish risk alerts through official channels, expose typical cases, guide the public to establish correct investment concepts, and enhance risk prevention awareness.
4. Promote global cooperation: Participate in the formulation of international virtual currency regulatory rules, strengthen information sharing and law enforcement cooperation with regulatory agencies in various countries, and address cross-border regulatory arbitrage.
7. Future trends and risk outlook
The risk in the virtual currency market in 2026 will exhibit three major characteristics: 'tighter regulation, technological iteration, and structural differentiation.' The global regulatory framework will be further improved, with stablecoins and decentralized finance (DeFi) becoming the focus of regulation. Blockchain technology's security performance will continue to improve, but the combination of AI and blockchain may give rise to new types of technological risks. The proportion of institutional funds will further increase, leading to a transformation of market volatility patterns towards 'institutionalization,' but systemic risks in extreme markets cannot be ignored.
Overall, the essence of the virtual currency market being 'high risk, high volatility' will not change. Investors need to remain rational, regulators must continue to strengthen risk prevention, and market participants should adhere to compliance bottom lines to jointly promote the industry towards a standardized and healthy direction.
Disclaimer: This report is based solely on publicly available market information, regulatory policies, and industry data from 2025 for risk assessment and does not constitute any investment advice. Virtual currency investment carries significant risks, and investors should make independent judgments and assume risks.
