Welcome to our institutional newsletter, Crypto Long & Short. This week:
- To win over big investors, DeFi builders must act as responsible money managers, not just software developers, writes Ben Nadareski.
- Bitcoin holders can survive crashes and protect their assets by making money through reinsurance, says Stephen Stonberg.
- Top headlines institutions should be aware of by Helene Braun.
- “Hyperliquid’s 70% Rally: What Drove HYPE from $40 to $75 in Six Weeks” in Chart of the Week.
-Alexandra Levis
Expert insight
Who answers the call at 3am when DeFi breaks?
By Ben Nadareski, Co-Founder and CEO of Solstice
Last week I shared something with CoinDesk that I want to sit with a little longer. A few minutes in an interview didn’t do it justice. My suggestion is that anyone building in DeFi should think of themselves as a financial asset manager who happens to write code, rather than a software team that handles money.
A few people pushed back, so let me take it a step further: what the institutions really want from us has almost nothing to do with the code. They want to answer an age-old question: “When something goes wrong, who picks up the phone?”
So far, the answer has been none. The code is law: no company, no jurisdiction and no name on the door. For a while we pushed it as the Unique Selling Proposition (USP) and I understand the appeal. “Trust the contract, not the man” may feel 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 guarantee code; they assess people and processes. They want to know who has opted out, who can move money, what happens at 03.00 when a key is compromised and whose responsibility it is to have considered these risks. If you give them a brilliant protocol written by an anonymous team with a multisignature wallet (multisig) managed by a group of people who have never met, the committee will not see it as an innovation. Instead, they will see it as an operational risk they cannot yet price.
And here I am: the accountability they ask for is what allows decentralization to grow. You get to keep the openness, composability, and permissionless rails—all while still answering the fundamental questions that any serious financial management should be able to address.
How does it look in practice? This means you have reserves you can verify in real time, giving anyone the ability to check solvency rather than relying on claims in a blog post or press release. It includes controls to ensure that no single person can move significant amounts of money alone because it is standard practice in well-run institutions (and it should bother us that most protocols do not comply with this). None of this is a big question; it is the absolute minimum.
I understand skepticism. People might say this is how you compromise the speed that makes crypto alluring. However, I see it differently. Moving fast on what you build is a gift, whereas moving fast with other people’s money (without anyone willing to be accountable for it) isn’t speed, it’s just risk waiting for a deadline. April showed us some of those deadlines, and there are more to come.
The audience for getting this right has already changed. The institutions that everyone keeps waiting for are not coming. They are already here managing real money on these rails right now while half the industry is debating whether they belong. The platforms that win in the next few 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 protection, and both should know who is in charge when it counts.
That is the bar I want us to be measured against, and I want it set higher than the banks — not at the same level. Not because regulators are coming, although they are. The harder question is whether we want to build it ourselves or wait for someone else to force our hand.
Principled perspectives
The centuries-old structure that solves bitcoin’s dividend problem
By Stephen Stonberg, CEO and Co-Founder, Tabit Insurance
Bitcoin holders face a dilemma: how to maintain ownership through market stress without being forced into actions that destroy long-term value? The answer is not another “crypto yield wrapper”. Like bitcoin adoption matures, a centuries-old financial structure is emerging as a compelling alternative: reinsurance.
BTC is currently trading well below its 2025 highs, and the decline is testing conviction across the investor spectrum. The investors who build lasting wealth are not those who predict bottoms or avoid moves; they are the ones that can last through corrections without being forced to sell. It requires a way to generate income from a long-term bitcoin position without relying on bitcoin’s price direction.
Why the traditional bitcoin yield playbook fails when you need it most
Most dividend offerings fall into two buckets: options strategies that monetize volatility, and lending platforms that rehypothecate assets. Both tend to break down exactly when the stress hits. Options strategies expose holders to path dependence, volatility regime shifts and counterparty risk, with a payoff that disappears when margin calls hit. 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 insurers that allows primary insurers to transfer parts of their risk portfolio to limit exposure to major events. These contracts operate independently of financial markets and create a structurally different return profile that combines insurance profits with conservative leverage, a time-tested approach that predates cryptocurrency by centuries.
The key insight is that reinsurance returns are driven by real-world risk selection and pricing rather than bitcoin’s price direction. Florida hurricane risk doesn’t care if bitcoin trades at $40,000 or $100,000. This creates a historically low correlation to both crypto markets and public equity beta with true diversification rather than repackaging the same underlying exposures.
The mechanics
The structure is simple: post bitcoin as capital in a regulated (re)insurance company, write USD-denominated policies and collect premiums in dollars. Reserves are held in cash and liquid funds, using standard trust and escrow mechanics that keep bitcoin shielded as capital, not rehypothecated. Here, reinsurance is structurally favored. BTC remains institutional grade within a corporate structure with legal separation that aims to isolate the assets of different investors, with investors able to have 24/7 on-chain proof of their bitcoin capital. This preserves the core objective: maintaining BTC exposure to long-term appreciation while generating dollar cash flows from uncorrelated reinsurance premiums.
Why institutions should consider reinsurance
The latest 13F filings suggest that long-term institutional investors are not all running for the exits. Select endowments, public pension plans and government-backed investors have added or maintained bitcoin ETF exposure through the draw, 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 on price appreciation alone. Reinsurance operates within an established regulatory framework, underpinned 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. That’s to keep bitcoin exposure intact, earn dollar-denominated income from an independent risk pool, and reduce the likelihood that market stress will force a sell at exactly the wrong time.
This week’s headlines
By Helene Braun
A dormant Satoshi-era bitcoin wallet moved after 14 years when its owner became the target of a $285 billion lawsuit, with notice sent through Bitcoin’s blockchain; institutional investors continued to pull 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 crypto-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 drove the HYPE from $40 to $75 in six weeks
HYPE ran from ~$44 to an ATH of $75.52 in six weeks (early May to June 3) as spot ETF launches from Bitwise and 21Shares ran over $130 million; ATH broke on the 2nd-3rd. June, when TD Securities published the first major banking report documenting Hyperliquid beating CME for oil price discovery, with Grayscale’s HYPG ETF launching on the same day.
Listen. Read. Clock. Engage.
- Listen: $3 billion exits Bitcoin ETFs. Why isn’t Wall Street panicking? Jennifer Sanasie is joined by David LaValle to unpack a $2.97 billion outflow streak from Bitcoin ETFs, Bloomberg’s Eric Balchunas explains why recent outflows may be more noise than signals, and Stellar Development Foundation CEO Denelle Dixon discusses DTCC’s decision to choose 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 implementation timeline for the GENIUS Act and how things will change once it’s here.
- Clock: “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 must resolve before she votes the CLARITY Act out of the Senate.
- Engage: The CoinDesk: Policy & Regulation event is returning to Washington, DC on September 24. This one-day event connects lawmakers with leading legal officials, compliance officers and policy experts to discuss the future of industry standards for digital assets.
Looking for more? Receive the latest crypto news from Pakinomist.com and market updates from Pakinomist.com/institutions.
Note: The views expressed in this column are those of the author and do not necessarily reflect the views of CoinDesk, Inc., CoinDesk Indices, or its owners and affiliates.
