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In mid-October 2025, the largest liquidation event in crypto history occurred, with $19 billion disappearing in 24 hours, following what many believed to be a response to President Trump’s announcement of possible significant tariffs on China. This exposed serious structural flaws that left liquidity vulnerable when we needed it most. For an industry that constantly touts institutional adoption as its north star, it has revealed how little infrastructure is actually resilient when it matters.
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The $19 billion liquidation exposed the core weaknesses of cryptocurrencies. Liquidity evaporates during times of stress because market makers are not protected or incentivized to stay active when volatility spikes. This is not a moral failure, but a rational response to weak infrastructure. “Institutional adoption” is mostly superficial, balance sheet holdings ≠ usage, and current on-chain markets remain thin, concentrated, and experimental (e.g., a small number of traders drive most trading volume), making them structurally unsuitable for real institutional participation. The way forward is engineered trust, not hype. Building risk management, compliance, and resiliency into protocols (through encryption, governance, and regulation) can transform decentralized technologies into scalable financial infrastructure.
Market makers (professional traders who estimate buy and sell prices to keep the market functioning) are supposed to provide stability during volatility by quoting prices that account for volatility, absorbing panic selling, and providing exit liquidity. In reality, most venues will reward you for being present 95% of the time, but not for being present when the knife is falling.
While it is important to scrutinize market maker behavior during times of high volatility and liquidation pressure, the absence of market makers is often a rational response to a system failure. Remaining active during a liquidation event can be a fool’s errand in environments where platforms lack operational resilience and appropriate backstop mechanisms. Market makers cannot be expected to act as a safeguard if the infrastructure itself does not provide protection for market makers.
Practical adoption requires what any functioning financial market provides: payment guarantees, protection of users’ deposits, platform reliability, and reasonable incentives, especially under stress. This allows liquidity providers to maintain the status quo. Moreover, it’s not about who owns the assets, it’s about who is actually using the rails. Holding Bitcoin on your balance sheet does not make you adopt cryptography any more than owning gold bars makes you a miner.
And for now, the numbers still fall short of the promise of programmable currencies and decentralized networks being used en masse by institutional bodies. Take Hyperliquid, the premier decentralized exchange, as an example. Since May 25, 2025, the leading Bitcoin (BTC) and Ethereum (ETH) pair has an average of 11,423 daily active users (unique addresses trading with a notional value of $1,000 or more). About 50% of that volume was driven by an average of just 37 users. These numbers show that without better market structures, these innovations will remain laboratory experiments rather than scalable financial systems.
The path forward requires building infrastructure to enable institutional participation and adoption. CME Group processes 3 billion contracts worth approximately $1,000 trillion annually as part of its overall risk management that protects users through due diligence requirements, anti-money laundering and sanctions compliance procedures, and audit trails. Carefully aligning these requirements to your business and product needs builds the trust that allows a teacher’s pension fund to invest alongside a hedge fund, for example.
The good news is that we now have blockchain technology tools to bridge the gap between the safety and ease of traditional finance and the innovation of decentralization.
Innovative cryptographic solutions
New blockchain technology now allows risk management to be built directly into the infrastructure. Smart contracts can automatically apply risk management rules, and trusted execution environments (TEEs) and zero-knowledge proofs can validate credentials without exposing sensitive data. These tools enable the kind of oversight institutions need while maintaining the efficiency and transparency benefits of blockchain technology and cryptography.
Decentralized governance and regulatory clarity
We are already witnessing a transition from theory to practice. Ooki DAO enforcement actions in 2022 have caused token holders to think more critically about whether they can participate in governance due to potential legal or regulatory uncertainty and potential personal liability. New cryptographic capabilities are now available to help alleviate these concerns and move the industry forward in a way that can foster governance and user adoption. Decentralized governance can include a risk management framework and allow institutions to participate.
Regulators are beginning to recognize that risk management and diversification are not mutually exclusive. Recently, the Bermuda Monetary Authority granted the first-ever license to a derivatives exchange governed by a DAO. This approval sets an important precedent. This proves that non-custodial decentralized platforms can operate within a recognized regulatory framework while ensuring users have complete independent control over their assets and private keys.
We have the technology to meet institutional standards. Innovation thrives when combined with carefully calibrated rules of the road, as seen with the passage of the GENIUS Act in the United States. Actual adoption is not driven by hype, corporate treasury holdings, speculation, or artificial metrics. It comes from the quiet, important work of building an infrastructure that financial institutions can actually trust.
If market structures remain weak, liquidity will remain fleeting. Instead, resilience must be built into the platform itself. Bridging the gap between traditional and decentralized markets by building institutional-grade performance and risk management directly into the protocol. This is how we can deliver on the promise of technology to create a secure and efficient global system that is open to all.
