Institutional investors may not be as prepared for the crypto market as they think, according to Custodia Bank CEO Caitlin Long.
Speaking at the Wyoming Blockchain Symposium, Long cautioned that Wall Street’s traditional models for managing risk could fall apart once the digital asset market turns bearish again.
“Big Finance has arrived in force, and it’s steering this cycle,” she noted, adding that while enthusiasm is strong, many institutions underestimate how different crypto markets are compared to stocks or bonds.
Legacy Tools Don’t Work in Real-Time Markets
In traditional finance, banks and funds rely on backstops like discount windows and delayed settlement mechanisms. These cushions allow firms to carry heavy leverage without immediate fallout. But crypto runs on real-time settlement, and Long warned that this removes the safety net. “It’s a different beast,” she said, predicting that liquidity crunches could catch unprepared firms off guard when volatility spikes.
Long, who has been active in crypto since 2012, stressed that another bear market is inevitable despite optimism from some newcomers. She believes it will expose the lack of readiness among large financial players diving into Bitcoin and other digital assets.
The Risk of Contagion
The rise of institutional treasuries holding Bitcoin and Ethereum has defined the current cycle, bringing mainstream credibility but also new vulnerabilities. Critics argue that if highly leveraged firms start selling during a downturn, the resulting cascade could rattle not just crypto but the broader financial system.
Chris Perkins, president of CoinFund, echoed these concerns. He pointed out that while crypto requires constant risk rebalancing, legacy markets take weekends and holidays off, creating a dangerous mismatch. “That’s how liquidity crises start,” he said.
Bear Market Stress Test Ahead
A recent report from venture capital firm Breed added fuel to these warnings, claiming many new Bitcoin treasury companies will likely collapse in the next downturn. With lower prices and excessive leverage, Breed predicted a feedback loop of forced selling that would deepen losses across the sector.
Despite the risks, Long emphasized that crypto’s real-time transparency remains its strength. The question is whether traditional institutions, built on slower-moving systems, can adapt before the next crash.
The information provided in this article is for informational purposes only and does not constitute financial, investment, or trading advice. Coindoo.com does not endorse or recommend any specific investment strategy or cryptocurrency. Always conduct your own research and consult with a licensed financial advisor before making any investment decisions.
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Source: https://coindoo.com/wall-street-isnt-ready-for-the-next-crypto-crash-custodia-ceo-warns/
