Welcome to our institutional newsletter, Crypto Long & Short. This week:
- To win over big investors, DeFi creators must act as responsible money managers, not just software developers, writes Ben Nadareski.
- Bitcoin holders can survive crises and protect their assets by earning income through reinsurance, says Stephen Stonberg.
- Top headlines institutions should pay attention to by Helene Braun.
- “Hyperliquid’s 70% Rally: What Propelled HYPE From $40 to $75 in Six Weeks” in Chart of the Week.
-Alexandra Levis
Expert Perspectives
Who answers the 3am call when DeFi fails?
By Ben Nadareski, Co-Founder and CEO of Solstice
Last week, I shared something with CoinDesk that I want to sit on a bit more. A few minutes in an interview didn’t do him justice. My suggestion is that anyone building DeFi should consider themselves a financial asset manager who writes code, rather than a software team who manages money.
Some people objected, so let me take it a step further: what institutions really want from us has almost nothing to do with the code. They want to answer an old question: “When something goes wrong, who answers the phone?”
So far, the answer has been no one. The code is law: no company, no jurisdiction and no name on the door. For a while, we touted it as the Unique Selling Proposition (USP) and I understand the appeal. “Trust the contract, not the human” may seem like the safest bet, but if you spend time with a risk committee, you’ll see how strange that sounds to them.
They do not subscribe code; They evaluate people and processes. They want to know who signed it, who can move funds, what happens at 3 in the morning when a key is compromised, and who is responsible for considering those risks. If you hand them a brilliant protocol written by an anonymous team, with a multisig wallet controlled by a group of people who have never met, the committee won’t see it as an innovation. Instead, they will see it as an operational risk that they cannot yet assess.
And this is where I have arrived: the accountability they ask for is what allows decentralization to grow. You can maintain openness, composability, and permissionless rails, all while answering the basic questions that any serious financial manager should be able to address.
What does that look like in practice? It means having reserves that you can verify in real time, allowing anyone to verify creditworthiness rather than relying on claims in a blog post or press release. It includes controls to ensure that no one person can move significant amounts of money alone, because that is standard practice in well-run institutions. (and we should be ashamed that most protocols do not comply with this). None of this is a big question; It’s the bare minimum.
I understand the skepticism. People might say that this is how the speed compromise that makes cryptocurrencies attractive. Although I see it differently. Moving quickly on what you build is a gift, while moving fast with other people’s money (with no one willing to be held accountable for it) is not speed, it’s just a risk of waiting for a deadline. April showed us some of those deadlines and there will be more.
The audience for doing this well has already changed. The institutions that everyone is still waiting for are not on the way. They’re already here, running real money on these rails right now, while half the industry debates whether they belong or not. The platforms that win in the coming years will be those that can include a Galaxy or Susquehanna along with someone opening their first wallet in Lagos. Both should have equal access and protections, and both should know who is responsible when necessary.
That’s the bar I want us to be measured against, and I want it to be higher than the banks, not at the same level. Not because the regulators will come, although they will. The more difficult question is whether we will build it ourselves or wait for someone to force us to do it.
Principled Perspectives
The century-old structure that solves bitcoin’s performance problem
By Stephen Stonberg, CEO and Co-Founder of Tabit Insurance
Bitcoin holders face a dilemma: how to preserve ownership through market stress without being forced to take actions that destroy long-term value? The answer is not another “crypto performance wrapper.” like bitcoin As adoption matures, a century-old financial structure is emerging as a compelling alternative: reinsurance.
BTC is currently trading well below its 2025 highs, and the drop is testing conviction across the spectrum of investors. The investors who generate lasting wealth are not those who predict lows or avoid declines; They are the ones who can endure the corrections without being forced to sell. That requires a way to generate income from a long-term bitcoin position without depending on the direction of the bitcoin price.
Why the traditional bitcoin performance manual fails when you need it most
Most yield offerings fall into two categories: options strategies that monetize volatility and lending platforms that remortgage assets. Both tend to break precisely when stress hits. Options strategies expose holders to path dependent, volatility regime changes and counterparty risk, with returns fading when margin calls arrive. Lending platforms can be worse: Bitcoin disappears into opaque collateral chains, and when liquidity dries up, so does the capital behind it.
Reinsurance is a completely different source of return
Reinsurance is insurance for insurance companies that allows primary insurers to transfer parts of their risk portfolio to limit exposure to large-scale events. These contracts operate independently of financial markets, creating a structurally different return profile that combines underwriting profits with conservative leverage, a proven approach that predates cryptocurrencies by centuries.
The key idea is that reinsurance returns are driven by risk selection and real-world pricing, rather than the direction of the bitcoin price. Florida hurricane risk doesn’t care if bitcoin is trading at $40,000 or $100,000. This creates a historically low correlation to both crypto markets and public equity beta with genuine diversification, rather than repackaging the same underlying exposures.
the mechanics
The structure is simple: post bitcoins as capital in a regulated (re)insurance vehicle, underwrite dollar-denominated policies, and collect premiums in dollars. Reserves are held in cash and cash equivalents, using standard trust and custody mechanisms, keeping the bitcoin protected as capital, not rehypothecated. Reinsurance has a structural advantage here. BTC remains in institutional-grade custody within a corporate structure with legal segregation intended to isolate assets from different investors, and investors can have on-chain proof of their bitcoin capital 24/7. This preserves the primary objective: maintaining BTC exposure for long-term appreciation, while generating dollar cash flows from uncorrelated reinsurance premiums.
Why institutions should consider reinsurance
Recent 13F filings suggest that not all long-duration institutional investors are rushing for the exits. Select endowments, public pension plans and sovereign wealth-backed investors have added or maintained exposure to bitcoin ETFs during the drawdown, underscoring that sophisticated allocators are increasingly treating regulated bitcoin exposure as a long-term portfolio position rather than a purely tactical trade.
But staying the course is easier to justify when a bitcoin position can produce cash flow without relying solely on price appreciation. Reinsurance operates within established regulatory perimeters, supported by actuarial discipline, underwriting controls and capital adequacy standards. For institutions that think in decades, that distinction is important. The goal is not to chase incremental returns by taking on more crypto-native risk. Your goal is to keep bitcoin exposure intact, earn dollar-denominated income from an independent risk fund, and reduce the likelihood that market stress will force a sale at precisely the wrong time.
Headlines of the week
By Helene Braun
A dormant Satoshi-era bitcoin wallet was moved after 14 years when the owner became the target of a $285 billion lawsuit, with notification sent via the Bitcoin blockchain; Institutional investors continued to withdraw money from bitcoin ETFs even as BTC revisited the $60,000 level that attracted buyers earlier this year; and DFG CEO James Wo, who built a billion-dollar cryptocurrency investment firm from a $20 million family-backed startup, said he remains bullish on bitcoin while questioning some of the market’s most aggressive ether price forecasts.
Chart of the week
Hyperliquid’s 70% Rally: What Propelled HYPE From $40 to $75 in Six Weeks
HYPE went from ~$44 to an ATH of $75.52 in six weeks (early May to June 3), as spot ETF launches from Bitwise and 21Shares generated over $130 million; ATH was broken on June 2-3 when TD Securities published the first major bank report documenting Hyperliquid beating CME in oil price discovery, and Grayscale’s HYPG ETF launched the same day.
Hear. Read. Look. Engage.
- Hear: $3 billion comes out of Bitcoin ETFs. Why Wall Street Isn’t Panic David LaValle joins Jennifer Sanasie to discuss a run of $2.97 billion outflows from Bitcoin ETFs, Bloomberg’s Eric Balchunas explains why the recent outflows may be more noise than signal, and Stellar Development Foundation CEO Denelle Dixon discusses DTCC’s decision to select Stellar.
- Read: In “Crypto for Advisors,” Beth Haddock reviews the three due diligence questions advisors should be asking in 2026. Then, Aaron Brogan reviews the GENIUS Act implementation timeline and how things will change once it’s here.
- Look: “I will not vote for CLARITY until we address ethics.” Senator Angela Alsobrooks joins CoinDesk Policy Protocol hosts Rebecca Rettig and Renato Mariotti to discuss the three outstanding issues she needs to resolve before voting on the CLARITY Act on the Senate floor.
- Engage: The CoinDesk: Policy and Regulation event will return to Washington, DC on September 24. This one-day event connects lawmakers with chief legal officers, compliance officers, and policy experts to discuss the future of digital asset industry standards.
Looking for more? Receive the latest cryptocurrency news at PakGazette.com and market updates at PakGazette.com/institutions.
Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc., CoinDesk Indices or their owners and affiliates.
