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Crypto markets strain as collateral mobility lags risk repricing

CoinDesk notes that when institutions could not mobilize collateral quickly, liquidity thinned and spreads widened, contributing to sharp price moves during volatility.

Reported · Written up by our desk · Market Structure

CoinDesk reports that a key driver of market stress is not necessarily too little capital, but capital trapped in the wrong place and unable to move fast enough as risk reprices minute by minute.

The outlet says geopolitical-driven volatility highlighted how settlement cycles, cut-off times, and batch processing can leave collateral unable to support positions in time. When institutions cannot redeploy collateral quickly, liquidity can thin, spreads can widen, and price moves can become more severe.

CoinDesk points to infrastructure built for fixed market hours and end-of-day processing that does not match digital assets and other markets moving toward continuous activity. It adds that collateral is often split across venues, custodians, asset classes, and jurisdictions, and that firms may still need one to two days for settlement and exposure management around operational cut-offs.

CoinDesk also cites LMAX Group data from January, saying the firm processed more than $300 billion in total volume in a week, including $60 billion in gold products. It adds that some institutions were forced out of positions overnight because they could not move assets out of equity or bond portfolios quickly enough to fund other exposure.

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