Custodia Bank CEO warns of TradFi firms facing first crypto winter

Institutional investors from the accepted concern satellite deficiency the updated hazard tolerance models to woody with crypto and whitethorn look occupation during the adjacent carnivore market, according to Custodia Bank CEO Caitlin Long.

“Big Finance is present successful a large way, and that seems to beryllium driving this cycle. I fishy it volition proceed to thrust this cycle,” Long told CNBC astatine the Wyoming Blockchain Symposium connected Friday.

Long said that bequest fiscal institutions are comfy taking connected ample amounts of leverage owed to fail-safes built into the system, similar discount windows and different “fault tolerances.” 

Long shares her insights astatine the Wyoming Blockchain Symposium. Source: CNBC

However, she warned that these advantages vanish successful crypto, wherever colony occurs successful real-time. The CEO said that the mismatch betwixt crypto and bequest systems could make a liquidity crunch for these institutions:

“Those kinds of responsibility tolerances are built into the strategy due to the fact that of bequest reasons, wherever systems were not updating successful real-time. In crypto, everything has to beryllium real-time, and it's conscionable a antithetic animal.

I bash interest however those titans of concern volition respond erstwhile the carnivore marketplace inevitably comes again. I cognize immoderate who are optimistic and deliberation it won't travel again. I've been astir since 2012, truthful I cognize it's coming again,” she added.

Institutional investors, including crypto treasury companies, person been the astir salient diagnostic of the existent marketplace cycle.

Some investors presumption this arsenic a affirmative improvement driving adoption forward, portion others pass that overleveraged and inexperienced firms volition dump crypto during the adjacent crypto carnivore market, triggering a contagion that spreads done the fiscal system.

Related: New crypto advocacy radical debuts astatine Wyoming summit

Custodia CEO echoes widely-held concerns of manufacture executives and analysts

“The biggest systemic hazard going guardant is the information that you person 1 ecosystem that manages hazard and rebalances successful real-time and different ecosystem that takes weekends, nights, and holidays off,” Chris Perkins, president of concern steadfast CoinFund, said.

This mismatch betwixt colony mechanisms tin trigger liquidity issues, which are the basal of each fiscal crises, Perkins told Cointelegraph.

In June, task superior (VC) steadfast Breed released a report concluding that astir caller Bitcoin (BTC) treasury companies would not past the adjacent marketplace downturn.

The VC steadfast warned that overleveraging and little plus prices volition make a vicious rhythm that forces these treasury companies to dump their assets connected the market, further depressing the crypto market.

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