As I noted in an earlier post, one of these new crypto-currencies crashed the other night when somebody tried to withdraw millions of dollars all at once. The currency has since recovered somewhat, but it illustrates how these currencies can be very volatile, especially if they are not widely exchanged. Volatility rarely works to the advantage of the small investor.
The same is true for derivative investments, which is why most people say these should be left to experts and people with deep pockets. Over a year, a stock price might not change too much. But it may change in small amounts very rapidly in a short period of time. These can trigger a sell-off in the market, if automated trades take over. This in turn, could tank the stock price, or the crypto-currency price, for a very short period of time. As the example from a few days ago illustrates, the price recovered very quickly, but not before a lot of these margin traders lost their shirts when their shares will sold off when certain trigger points were reached.
The problem for derivative traders is that you can lose more than you invested. For you and me, the stock or bond investor (not "trader") the most we can lose is what we have in the game. I put $5000 into GM stock and lost it all.
It is, quite frankly, like borrowing money to invest, only worse. At least with that half-assed scheme, the total amount you can lose is what you borrowed. With derivatives, the sky can be the limit.
So not only are these a shitty investment - or at least a wildly risky one - for the small investor, they do on occasion bite us all on the ass when too many people are speculating on stock prices rather than investing in companies. When a market moves from "investment" to "trading" too far, it can become wildly unstable. And instability rarely benefits the small investor!