According to Custodia Bank CEO Ketleen Long, traditional finance investors are lacking updated risk tolerance models to deal with Crypto and may face trouble during the next bear market.
“Big Finance is here in a big way, and it is running this cycle. I suspect that it will continue to run this cycle,” told CNBC at the Vyoming Blockchain Seminar on Friday.
Long said that heritage financial institutions are comfortable to benefit in large quantities due to unsuccessful-safe-reserved, such as discount window and other “mistake tolerance.”
However, he warned that these advantages disappear in the crypto, where there is a real -time disposal. The CEO said that mismatched between crypto and heritage systems can create a liquidity crunch for these institutions:
“Those types of mistake tolerance is made in the system due to heritage, where the systems were not updating in real time. In Crypto, everything should be real time, and it is just a separate animal.
I am worried about how they will respond when the bear market essentially reappears. I know that some who are optimistic and think that it will not come again. I have been around since 2012, so I know it is coming again, ”he said.
Institutional investors including Crypto Treasury companies have been the most prominent feature of the current market cycle.
Some investors see this as a positive development driving adoption, while others warns that overlaverage and inexperienced firms will dump crypto during the next Crypto bear market, which trigger a fingering spread through the financial system.
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Custodia CEOs resonate widely held concerns of officers and analysts of Custodia
Chris Perkins, president of the investment firm Coinfund, said, “The biggest systemic risk that is ahead is that you have an ecosystem that manages risk and imbalance in real time and another ecosystem that shuts down weekends, nights and holidays.”
https://www.youtube.com/watch?v=zad4fima- Oq
Between the disposal mechanisms it can trigger mismatched liquidity issues, which are the root of all financial crises, Perkins explained the cointolagraph.
In June, Venture Capital (VC) firm released Report Concluding that most new bitcoins (BTC) Treasury companies will not survive the recession in the next market.
The VC firm warned that overlearing and low asset prices would create a vicious cycle that forces these Treasury companies to dump their assets on the market to further disappoint the crypto market.
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