The following is a guest post from Mauricio Di Bartolomeo, co-founder and CSO at Ledn.
After years of dismissing this asset, Wall Street is finally recognizing Bitcoin’s potential. Bee Bitcoin-2024 in Nashville the air crackled not only with the usual enthusiasm, but also with the unmistakable scent of revenge. When Donald Trump pledged allegiance to Bitcoin as a reserve asset and Cantor Fitzgerald discussed his plans for a significant $2 billion Bitcoin financing facility, it became crystal clear: traditional finance is no longer just dipping its toes in digital assets; it is diving head first. The long-cherished position of our sector is playing out before our eyes.
A sector could not dream of better approval. For years we have been labeled as marginal, as a bubble, as a passing fad. We have been mocked and vilified by the very institutions that are now doing their best to get a share of the action. It’s not just validation; it is a complete capitulation of the old system to the inevitable future of the financial world.
However, this validation requires an evolution. The digital asset industry must offer both the risk management expertise of traditional finance and the independence ethos of crypto. We’ve seen this movie before: TradFi players entering the crypto space with deep pockets but a shallow understanding, and crypto-native companies stumbling while trying to offer traditional financial products. The strongest operators are those who can combine the best of both worlds.
Build bridges, not walls
In 2018, my co-founder (Adam Reeds) and I found ourselves in a predicament familiar to many early Bitcoin users: why should Bitcoiners sell their precious assets to access liquidity? This simple question led us down the rabbit hole of Bitcoin-backed lending, a concept that seemed obvious to us but was met with skepticism by the traditional financial world. That’s why we started building a solution to our own problem: a way to borrow against Bitcoin without giving up ownership. Six years and more than $860 million in loans later, our vision has been validated by the same institutions that once dismissed us as crazy.
To be fair, traditional financial players have been providing credit for decades and have robust risk management practices. However, it is equally true that most traditional financial players have little to no experience with digital assets.
While they have significant capital and established risk management practices, they lack the operational expertise specific to Bitcoin and digital assets. Understanding the new challenges of blockchain technology, managing digital wallets, navigating the 24/7 nature of crypto markets, and understanding the unique regulatory landscape of digital assets are all crucial skills that many TradFi institutions are still developing. to be developed.
This knowledge gap highlights the importance of collaboration between traditional financial companies and Bitcoin-native companies. By combining TradFi’s robust risk management practices with Bitcoin’s transparency and the technical expertise of crypto specialists, we can create safer, more efficient lending platforms that meet the needs of both institutional and retail clients in this market.
We embraced this early in our journey and engaged TradFi’s expertise when we brought in our Chief Investment Officer, John Glover. His decades of experience TD effects And Barclays have been invaluable in shaping our risk management strategies and lending practices, and his deep knowledge of traditional financial markets has helped us bridge the established TradiFi world and the emerging digital asset ecosystem.
The events that brought down Celsius and BlockFi, among others, showed us that even the strongest and most connected players can succumb to careless risk management. These companies took shortcuts and operated irresponsibly, prioritizing quick profits (often for their own personal benefit) before the long-term integrity of their business and the safety of customer assets. Put another way, traditional financial players just getting into offering Bitcoin and crypto products are facing similar risks as the crypto and Bitcoin native companies they faced when they got into TradFi-like products, such as returns and loans.
That is precisely why the arrival of institutional players like Cantor Fitzgerald is a turning point. This influx of institutional capital will reduce costs for borrowers, increase market liquidity and enhance the credibility of the entire sector.
Now the real work begins
We must remember that the best operators in this space will always be those who can combine TradFi’s robust risk management practices with Bitcoin’s commitment to transparency and sovereignty.
For investors and borrowers, due diligence is as important as ever. Look for platforms that prioritize transparency, verifiable evidence of reserves and provide clear insights into how they manage assets. Look for providers with a proven track record of reliability across multiple market cycles. Consider the legal structure of the lending platform, ensuring that your assets are protected through measures such as ring-fenced risks and custody services.
We couldn’t be more excited to see the traditional financial industry waking up to Bitcoin as the best lending collateral in the world. This was a big part of our long-term thesis, and we believe this will help drive down the cost of borrowing for bitcoiners as institutions lower funding costs. Competition will also force players to continuously improve the customer experience, leading to greater adoption, greater understanding and greater liquidity.
The future indeed looks orange. And for those who have long believed in the power of Bitcoin as a reserve, things have never looked so bright.