Caitlin Long Warns New Institutions May Fold During Next Crypto Winter
August 23, 2025 — At the Wyoming Blockchain Symposium, Custodia Bank CEO Caitlin Long issued a cautionary forecast regarding the upcoming crypto bear market, emphasizing risks faced by traditional financial institutions newly entering the crypto space.
Long highlighted a fundamental mismatch between legacy financial systems and blockchain protocols that could lead to significant challenges for traditional finance (TradFi) firms during the next downturn in the crypto cycle. Whereas traditional financial systems operate with various built-in fail-safes—such as discount windows that allow institutions to borrow liquidity in times of stress—and often function with delayed settlement cycles, blockchain transactions settle in real-time. This key difference, she warned, might create liquidity crunches for firms unprepared for such instantaneous settlement demands.
“Big Finance is here in a big way, and that seems to be driving this cycle. I suspect it will continue to drive this cycle,” Long said in an interview with CNBC. She noted that many large financial players have become comfortable with taking on considerable leverage because legacy systems provide fault tolerances that cushion risks during market stresses. These protections vanish in the crypto realm, where everything must execute in real-time, creating a “different animal” of financial risk.
Long, who has observed crypto markets since 2012, cautioned that a crypto winter is inevitable, despite some optimism among market participants that the harsh bear phases won’t recur. She expressed concern about how “titans of finance” will react when market conditions deteriorate again, suggesting that some institutions may be ill-equipped for such realities.
Institutional investors from traditional finance have been prominent during the current market cycle, fueling adoption but also raising concerns. Analysts fear that many newly engaged firms, particularly crypto treasury companies, may be overleveraged and lack the experience or risk frameworks needed to withstand downturns. When the next bear market hits, these entities might be forced to liquidate their crypto holdings rapidly, potentially triggering a contagion that ripples through financial markets.
Chris Perkins, president of investment firm CoinFund, echoed these concerns. He pointed out the systemic risk created by operating two different ecosystems: one that manages risk and rebalances portfolios in real-time (crypto) and one that operates on slower cycles, taking breaks on weekends, nights, and holidays (traditional finance). This discrepancy, he explained to Cointelegraph, could precipitate liquidity issues—the root cause of many financial crises.
Supporting these warnings, a June report from venture capital firm Breed concluded most new Bitcoin treasury companies might not survive the next crypto market downturn. The firm highlighted how overleveraging combined with falling asset prices could force widespread asset sell-offs, further depressing the market and amplifying losses.
As the crypto ecosystem continues to blend with traditional finance, Long’s remarks serve as a reminder of the unique challenges in harmonizing two vastly different financial infrastructures. Market participants and regulators may need to prepare for increased volatility and potential institutional failures in the next crypto winter.
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