The following is a guest post from Mauricio Di Bartolomeo, co-founder and CSO at Ledn.
After years of rejecting this asset, Wall Street is finally recognizing the potential of Bitcoin. HAS Bitcoin 2024 in Nashville, the air crackled not only with the usual enthusiasm, but also with the inimitable odor of vindication. As Donald Trump pledged allegiance to Bitcoin as a reserve asset and Cantor Fitzgerald explained his plans for a massive $2 billion Bitcoin financing facility, things became clear: traditional finance is no longer content to launch into digital assets; it’s diving head first. Our industry’s long-standing thesis is playing out before our eyes.
An industry couldn’t ask for better support. For years, we have been described as fringes, bubbles, a passing fad. We have been mocked and vilified by the very institutions now scrambling to get a piece of the action. It’s not just validation; it is a total capitulation of the old system to the inevitable future of finance.
This validation, however, requires evolution. The digital assets sector must offer both the risk management expertise of traditional finance and the independence ethos of crypto. We’ve seen this movie before: TradFi players enter the crypto space with deep pockets but shallow understanding, and crypto-native companies stumble as they try to offer traditional financial products. The strongest operators are those who know how to combine the best of both worlds.
Build bridges, not walls
In 2018, my co-founder (Adam Reeds) and I found ourselves in a situation familiar to many early adopters of Bitcoin: why should Bitcoiners sell their valuable assets to access liquidity? This simple question led us down the rabbit hole of Bitcoin-backed loans, a concept that seemed obvious to us but was met with skepticism from traditional finance. 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 confirmed by the very institutions that once called us crazy.
It is fair to say that traditional financial players have been lending for many decades and have strong risk management practices. However, it is also true that most traditional financial players have little or no experience with digital assets.
Even though they have significant capital and well-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 grasping the unique regulatory landscape of digital assets are all crucial skills that many TradFi institutions are still developing.
This lack of knowledge highlights the importance of collaboration between traditional finance and Bitcoin-native companies. By combining TradFi’s strong risk management practices with the transparency of Bitcoin and the technical expertise of crypto specialists, we can create safer, more efficient lending platforms that meet the needs of institutional and retail clients in this market .
We embraced this early on in our journey, drawing on TradFi’s expertise when we brought in our ‘Chief Investment Officer’, John Glover. His decades of experience TD Securities And Barclays have been invaluable in shaping our risk management strategies and lending practices, and his deep understanding of traditional financial markets has helped us bridge the established TradiFi world with the emerging digital asset ecosystem.
The events that brought down Celsius and BlockFi showed us that even the strongest, most connected players can succumb to careless risk management. These companies took shortcuts and operated irresponsibly, prioritizing quick wins (often for their own personal benefit) ahead of the long-term integrity of their business and the safety of their customers’ assets. In other words, traditional financial players venturing into Bitcoin and crypto product offerings face similar risks to those that native crypto and Bitcoin businesses face when venturing into TradFi-like products. , such as yield and loans.
This is precisely why the entry of institutional players like Cantor Fitzgerald constitutes a watershed moment. This influx of institutional capital will reduce costs for borrowers, increase market liquidity and strengthen the credibility of the entire sector.
Now the real work begins
We must not forget that the best operators in this space will always be those who can combine TradFi’s strong risk management practices with Bitcoin’s commitment to transparency and sovereignty.
For investors and borrowers, due diligence is more essential than ever. Look for platforms that prioritize transparency, verifiable proof of reserves and offer clear information on how they manage assets. Look for suppliers with a proven track record of reliability over multiple market cycles. Consider the legal structure of the lending platform, ensuring your assets are protected through measures such as risk ring-fencing and custodial services.
We couldn’t be more excited to see traditional finance awaken to Bitcoin as the world’s best loan collateral. This was an integral part of our long-term thesis and we believe it will help reduce the cost of loans for bitcoiners as institutions reduce the cost of funding. Competition will also force players to continually improve the customer experience and lead to more adoption, more understanding and more liquidity.
The future does indeed look orange. And for those who have long believed in the power of Bitcoin as a reserve asset, it has never been brighter.
