Welcome to the institutional Crypto Long & Short newsletter. This week:
- Sygnum Bank’s Pascal Eberle writes that investors are recognizing that custody is less about holding assets and more about proving you’re holding them correctly.
- Andy Baehr of CoinDesk Indices offers a “Vibe Check” and writes about how, immediately after Election Day in New York, among other political activities, the cryptocurrency market is waiting for a new leader to spark its next rally.
- In the “Chart of the Week,” we examine the price of ETH in relation to average DeFi pool returns and BTC/ETH funding rates.
-Alexandra Levis
Expert Perspectives
Redefining the custody standard for banking
– By Pascal Eberlechief of staff, Sygnum Bank
The walls between traditional and future finance are dissolving faster than most realize. Regulated institutions no longer dismiss native blockchain features. In fact, they are adopting them. As a result, the next custody standard will be based on crypto accountability.
Investors are recognizing that custody is less about holding assets and more about proving that you are holding them correctly. Multi-signature technology (multisig) provides that proof, continuously and cryptographically.
Where traditional custody falls short
Legacy custody operates under the premise of centralized control. When you deposit assets with a traditional custodian, you cede authority to an outside entity. This model requires absolute trust in institutional processes that remain invisible to clients and are based on legal/regulatory regimes, which can have their own complexities. This can create significant counterparty risk depending on the regulatory regime under which the lender operates. Certain regulatory regimes provide better customer protection than others. For example, banks in Switzerland are legally required to segregate client assets, keeping them away from bankruptcy, and remortgaging collateral is not permitted unless the client explicitly agrees. However, ultimately this still requires trust in banks, banking law and banking regulators to enforce these rules. But hope, trust, and belief are not characteristics of security.
Multi-signature technology changes the entire custody paradigm. Instead of one party holding all the keys (literally), control is distributed. No entity can move funds unilaterally. Clients have their own keys as part of the security architecture. Each transaction requires multiple approvals, creating an unprecedented level of liability. Instead of relying on (banking) law, “the code is the law” becomes the new paradigm. Law enforcement does not depend on any regulator, but is ensured by the blockchain. In the case of Bitcoin, it is the most powerful computer network in the world.
It is a revolution both philosophical and technological. Multi-signature escrow embodies the cypherpunk principle: “Don’t trust, verify.” Clients can monitor their on-chain assets in real time. They see exactly where your properties are and how they are protected. They participate in protecting their own assets rather than outsourcing it entirely to an institution.
Before blockchain technology, this shared custody model was simply impossible. Banks had no mechanism to distribute control while maintaining security and efficiency. Now they do it. Multi-factor authentication transformed the way we access applications by requiring multiple verification methods. Multi-signature wallets will similarly transform the way we protect assets by requiring multiple signing authorities.
Crypto Liability Changes Everything
Henry Ford once said that customers would have asked for faster horses, not cars. Similarly, most investors still don’t know how to apply for custody with multiple signatures. But once they experience the transparency of on-chain asset monitoring, the security of distributed key management, and the control of participating in protecting their own assets, traditional custody models will feel as outdated as paper stock certificates.
Banks that cling to legacy opacity will lose their place in the competitive market. Just as the industry once standardized around SWIFT for messaging and clearinghouses for settlement, the next standard will be crypto liability. Multisig is becoming the baseline expectation that customers will demand because it is objectively superior. Reduces single points of failure, prevents internal fraud, enables real-time verification, and gives clients real control over their assets. Once customers experience this level of transparency and security, they will accept nothing less.
Customers want visibility, control and accountability. Multi-signature escrow offers all three.
Expert Perspectives
Promises made, times tough
– By Andy Baehr, CFA, Head of Product and Research, CoinDesk Indices
On Sunday, New York City (and, I assume, much of the rest of North America) was plunged into standard time darkness; the sun set at 4:49 pm. Yesterday, New Yorkers elected a new mayor, plunging the city into a new polarized phase. The mood in crypto has felt similar lately: resigned, hunched over, wondering where the endless days of summer have gone. With the government shut down for a month, crypto legislative progress on pause, and Fed policy offering little bullish convexity, it is difficult to find catalysts for an uptrend. Commentators are building hopeful narratives and rejecting end-of-cycle FUD, but the weight of poor price performance and the bruises left by the October 10 event keep the mood sour. It doesn’t help that stocks are firing on all cylinders: The Nasdaq Composite hasn’t had a streak of bullish months this long since 2017.
Sober Uptober: 20 CoinDesk names fared poorly in a traditionally positive month
It may be helpful to think back to a year ago, days before the 2024 presidential election, for perspective. The CoinDesk 20 index was below 2,000. Bitcoin was at $60,000. By the end of November, CD20 had nearly doubled, ETH touched 4,000, and bitcoin was on its way to $100,000, its champagne moment. The market knew support for digital assets would come (and it has), but market timing and asset selection have been painfully difficult. The first quarter tariff tantrum tested faith and the snapback was too quick for most to anticipate. ETH wasn’t anyone’s favorite portfolio item at the beginning of the second quarter, until it took the entire market to all-time highs.
Performance since Election Day 2024: Big numbers mask tough time
In a few weeks, those periods of post-election and Inauguration Day jubilation will turn into 1-year returns, and we will feel the need to demonstrate longer-lasting asset class performance. Namely, look at the performance from opening day to today; Only the surge in ETH power stands out as impressive.
Price Action Since Inauguration Day: Only ETH Has Led the Way Up Among the Biggest Names
The cryptocurrency market is looking for leadership to spur another broad rally. Bitcoin led in 2024, making its way into investment portfolios through ETFs and treasury adoption. Ether led in 2025, benefiting from the growth of stablecoins and tokenization narratives that eventually gained institutional traction. XRP (and Ripple) have posted notable performance even though their history remains largely absent from the talking points that drive allocators. Solana has become increasingly public (sponsorships, speaking engagements, and consumer adoption), but SOL’s performance has lagged behind its ambitions. What narrative and what asset will provide the next spark? The market seems to be waiting for an answer.
Chart of the week
This week, we analyze the price of ETH in relation to average DeFi pool returns and BTC/ETH funding rates. Since August 2025, the price of ETH has increased, while both the 7-day rolling DeFi pool APY (performance across all pools tracked by DeFillama) and ETH funding rates have been trending steadily downward. This divergence strongly suggests that the rally is a “Digital Asset Treasury” (DAT) narrative/flow-driven trading, not a demand-driven move based on utility or high performance. DeFi’s sustained underperformance is a key sign of weak underlying demand for ETH’s core DeFi utility, a factor that will likely become a headwind and challenge the continuation of the DAT narrative as institutional flows continue to slow.
Hear. Read. Look. Engage.
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