The Need for Institutional Adoption in Crypto to Move Beyond Speculation

As the cryptocurrency market evolves, the recent massive liquidation event underscores the fragile nature of its liquidity and the need for robust infrastructure. For meaningful institutional involvement, the crypto sector must develop reliable, resilient frameworks that go beyond mere speculation.

Key Takeaways

A recent $19 billion liquidation event exposed vulnerabilities in the cryptocurrency market.
Market makers provide essential stability but are often absent during times of crisis due to inadequate system resilience.
Genuine adoption of crypto depends on reliable infrastructure that ensures user protections and settlement guarantees.
Current engagement by institutional entities is limited and requires better market structures.
Innovative blockchain technologies can enhance risk management and support decentralized governance.
Regulatory advancements are paving the way for safer institutional participation in the crypto space.

By embedding institutional-grade performance and risk management directly into protocols, we bridge the gap between the traditional and decentralized markets.

The Fragility of Crypto Liquidity

In mid-October 2025, the cryptocurrency market experienced its largest liquidation event ever, erasing $19 billion in just 24 hours. This incident many attribute to President Trump’s potential announcement of heavy tariffs on China. This situation exposed a significant issue: the inherent weakness of liquidity during critical moments. Despite the industry's focus on institutional adoption as its primary goal, it became evident that there is a lack of robust infrastructure when it is most needed.

Market makers are professional traders that help maintain market stability by providing buy and sell prices. They are expected to stabilize markets during volatility by absorbing panic selling and providing exit liquidity. However, in reality, many trading venues reward market makers for their consistent presence rather than their continued activity during volatile times.

While scrutinizing market makers' behavior during high-pressure situations is essential, their absence can be a logical reaction to an unworkable system. If trading platforms lack operational resilience or effective risk management strategies, remaining active during a liquidation event could be challenging and unnecessarily risky. We cannot rely on market makers to act as a safety net if the overall infrastructure fails to protect them.

For substantial adoption to occur, cryptocurrency needs the same guarantees that traditional financial markets offer: reliable settlement processes, protection for user deposits, dependable platform performance, and sound incentive structures, especially during stressful periods. This stability encourages liquidity providers to remain committed. Moreover, it's crucial to differentiate between merely holding assets and genuinely using blockchain technology; owning Bitcoin does not imply one is utilizing crypto technology any more than having gold bars means one is involved in mining.

At present, participation numbers do not align with the expectations of widespread adoption of programmable money and decentralized networks. For instance, since May 25, 2025, Hyperliquid, a leading decentralized exchange, has averaged only 11,423 daily active users engaged in trading prominent Bitcoin and Ethereum pairs. Approximately half of this activity was driven by just 37 users — data that indicates without improved market infrastructure, these technological advancements may remain experimental rather than paving the way for scalable financial solutions.

Building the Necessary Infrastructure for Adoption

To advance, we need to create the structural foundation that will enable institutional engagement. The CME Group, for instance, handles around three billion contracts each year worth approximately $1 quadrillion. This operation includes a comprehensive risk management framework that protects users through thorough due diligence, anti-money laundering, sanctions compliance, and meticulous audit trails. When such requirements align with the specific needs of services or products, they foster trust, allowing various stakeholders—such as teachers' pension funds—to invest alongside hedge funds effectively.

Incorporating Innovative Blockchain Solutions

Recent developments in blockchain technology can integrate risk management into the core infrastructure itself. Smart contracts can automatically enforce risk management rules, while Trusted Execution Environments (TEEs) and zero-knowledge proofs enable verification of credentials without compromising sensitive information. These innovations ensure the level of oversight required by institutions while capitalizing on the efficiency and transparency benefits that blockchain and cryptography provide.

Advancements in Decentralized Governance and Regulatory Clarity

We are witnessing a move from theory to practice in the industry. The 2022 enforcement action against Ooki DAO sparked token holders to contemplate their governance participation amid uncertainties regarding legal or regulatory implications and personal liability risks. New cryptographic advancements are now available to facilitate the industry's evolution by alleviating these concerns and bolstering governance and user involvement. Decentralized governance can incorporate risk management frameworks that allow institutions to participate actively.

Regulatory authorities are starting to recognize that risk management and decentralization can coexist effectively. A recent milestone was the Bermuda Monetary Authority granting the first-ever license to a DAO-governed derivatives exchange. This decision sets an important precedent, demonstrating that decentralized, non-custodial platforms can function within established regulatory structures while allowing users to retain complete control over their assets and private keys.

Our technological advancements align with the standards required by institutions. As exemplified by the recent GENIUS Act legislation in the United States, beneficial innovation arises when regulations are thoughtfully crafted. Genuine adoption will not result from hype, speculative corporate treasury holdings, or artificial metrics. Instead, it will stem from the ongoing, foundational efforts to construct infrastructure that financial entities can genuinely trust.

If the current market structure remains vulnerable, liquidity will be inconsistent. Therefore, we must design resilience into the platforms used. By integrating institutional-grade performance and risk management directly into protocols, we can connect traditional and decentralized markets seamlessly. This is how we can deliver on the promise of building a safe, efficient, and globally accessible financial system.