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Happy Wednesday, This is your institutional newsletter, Crypto Long & Short. This week:
When capital can’t move fast enough, markets pay the price
by Jenna Wright, managing director, digital assets, LMAX Group
Markets rarely break down because there is too little capital in circulation. More often, they come under strain because capital is in the wrong place at the wrong time. Recent volatility driven by geopolitical tensions has reinforced that lesson. Institutions had money, collateral and balance-sheet capacity available, but too much of it was trapped in systems still governed by batch processing, cut-off times and settlement cycles. Risk was repricing by the minute; collateral was not.
This mismatch is no longer a back-office inconvenience; it is a market-structure problem. When institutions cannot mobilise collateral quickly enough to support their positions, liquidity thins, spreads widen and price moves become unnecessarily sharp. The problem is not volatility alone, but market infrastructure that has failed to keep pace with the markets it serves.
The shift is already visible. Digital assets trade around the clock. FX and derivatives markets are moving steadily towards more continuous activity. Investors increasingly want instant access and an instant response. Yet much of the infrastructure that supports institutional trading was designed for a world of fixed market hours and end-of-day processes.
That gap matters most when markets are under stress. Collateral is still split across venues, custodians, asset classes and jurisdictions. Companies still pre-position capital because settlement may take one or two days. They still manage exposure around operational cut-offs that make little sense in markets that move continuously.
We saw the consequences in January. LMAX Group processed more than $300 billion in total volume in a single week, including $60 billion in gold products alone. Across the wider market, some institutions were forced out of positions overnight because they could not move assets out of equity or bond portfolios quickly enough to fund their gold or energy exposure. The collateral was there. It simply could not move fast enough.
That is the flaw volatility exposes. Markets have become faster, more global and more interconnected, while capital movement remains slow and fragmented. Closing that gap requires a different way of thinking about cash, collateral and settlement.
Settlement remains one of the weakest links in capital markets. Institutions can execute trades globally in milliseconds, but the transfer of value that supports those trades can still take days. That delay creates funding pressure, operational risk and unnecessary capital drag.
This is where stablecoins become relevant to institutional markets. Strip away the noise and the use case is straightforward: they allow cash-like value to move with the speed and programmability of digital assets. For firms still working around T+1 or T+2 settlement, nostro and vostro accounts, and hard cut-off times, that is not a marginal improvement. It changes what is operationally possible.
The market has already moved beyond theory. Stablecoin market capitalisation is now around $320 billion, and recent industry data points to record levels of on-chain transfer activity. The more important point, however, is not the headline number. It is that regulated institutions are beginning to treat stablecoins and tokenised cash as settlement infrastructure rather than crypto-market curiosity.
That distinction matters. A stablecoin does not need to replace the financial system to be useful. Its role is more practical: to allow money to move at the same speed as the risk it is supporting. In continuous markets, that ability will become table stakes. Any institution that cannot settle, fund or rebalance in real-time will be carrying a disadvantage before the trade even begins.
