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Settlement delays can thin liquidity as risk reprices in minutes

The analysis points to collateral unable to move quickly enough to support positions during stress, widening spreads and sharp price moves.

Reported · Written up by our desk · Market Structure

CoinDesk’s Crypto Long & Short argues that market breakdowns often stem less from a shortage of capital and more from capital trapped in the wrong place at the wrong time, particularly when risk reprices rapidly.

The column describes settlement cycles, batch processing, and end-of-day cutoffs as infrastructure gaps that limit how fast institutions can mobilize collateral, noting that when collateral does not keep up, liquidity can thin and spreads can widen, leading to unnecessarily sharp price moves.

It adds that the need for faster movement is rising because digital assets trade around the clock and derivatives and FX markets are trending toward more continuous activity, while much institutional trading infrastructure still relies on fixed market hours and operational cut-offs.

Using January as an example, the piece says LMAX Group processed more than $300 billion in total volume in a single week, including $60 billion in gold products, and that some institutions were forced out of overnight positions because they could not move assets quickly enough to fund other exposures.

The author concludes that stablecoins and tokenization are emerging as “plumbing” to help money move at the speed required by the risks it supports.

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