âTradFi Firms May Be Unprepared for Next Crypto Winter
Industry veterans caution that traditional finance (TradFi) institutions may lack the necessary preparation for a crypto bear market. Caitlin Long, CEO of Custodia Bank, highlights a key risk: TradFi's reliance on delayed settlement and fail-safes, which are absent in crypto's real-time settlement environment.
This mismatch could lead to a liquidity crunch for legacy firms. Chris Perkins, president of CoinFund, identifies differing settlement mechanisms as a major systemic risk, emphasizing that liquidity issues are the root of all financial crises. A report by Breed VC also found that many new crypto treasury companies may not survive a downturn due to overleveraging and forced selling.
The next crypto bear market will test TradFi's ability to adapt its risk models to the digital asset world.