Institutional Crypto Market Faces Evolutionary Shift

The growth of institutional participation in digital assets has highlighted the need for a reevaluation of the crypto market structure. Market manipulation concerns, fragmented regulation, uneven liquidity, and persistent security risks remain significant barriers to entry for sophisticated investors.

Crossovers Markets' CROSSx execution-only ECN is an alternative solution that addresses these challenges by providing fungibility between different venues and allowing institutions to buy assets on one venue and sell on another. Brandon Mulvihill, Co-Founder and CEO of Crossover Markets, highlights the need for bank-led custody and U.S.-based regulation as key catalysts for growth.

Traditional financial institutions demand separation of duties, which vertically integrated exchanges cannot provide. This is driving a shift towards more unbundled models, where trading, custody, and market-making are separated to reduce fees and improve execution quality. Regulatory clarity, particularly around market structure, will be crucial in enabling this shift.

In the next three to five years, crypto trading infrastructure is expected to evolve towards more institutional-grade models, with a focus on lower latency, clearer separation of execution from custody, and market structure practices borrowed from traditional finance. As regulatory clarity improves and institutional participation grows, trading venues will need to support more robust execution, clearing, and custody functions while maintaining top-tier performance and reliability.