Updated Jul 22, 2026, 3:11 p.m. Published Jul 22, 2026, 3:09 p.m.
4 min read
Summary
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Welcome to our institutional newsletter, Crypto Long & Short. This week:
- The hardest allocation question isn’t what to own, it’s what you can survive holding, writes Gregory Mall.
- Top headlines institutions should pay attention to by Francisco Rodrigues.
- “BTC ETF Flows Turn Positive After 8-Week Slide” in Chart of the Week.
Thanks for joining us!
Convexity or Survival: What Allocators Should Know About Sizing Crypto Risk
- By Gregory Mall, chief investment officer, Lionsoul Global
Most crypto allocation debates focus on what to own. The harder question, and often the more useful one, is what an investor can actually survive holding.
For most of its history, crypto sat outside the financial system, but that has changed. Spot bitcoin and ether exchange-traded products opened a regulated distribution channel, drawing institutional capital into the asset class while also letting it leave quickly when sentiment turns. Stablecoin flows now reach into short-term Treasury markets. Crypto has become wired into the same macro plumbing as traditional asset classes.
This interconnection carries a consequence allocators tend to underestimate. Diversification does more work in calm markets than in stressed ones. In risk-off regimes, correlations across tokens rise, and the protection investors assumed they held fades. Counterintuitively, holding more coins rarely translates into holding less risk. Durable risk management comes from controlling exposure. Lengthening the list of holdings does little on its own.
Why rules can beat emotion
The most expensive mistake in crypto is usually behavioral: abandoning a sound strategy at the worst possible moment, selling into a drawdown the portfolio was never sized to withstand. This is where systematic discipline earns its place. Decades of evidence on time-series momentum show that rules-based, trend-following approaches can reduce drawdowns without requiring anyone to forecast the next move. In a market as reflexive as crypto, that discipline can matter as much as the position itself.
Three ways to express the same conviction
Most portfolios reduce to three archetypes:
- Single-asset bitcoin. Maximum convexity, and maximum drawdown risk.
- A large-cap basket. Partial diversification, though often with higher volatility and a rougher path.
- A dynamically managed sleeve. Cash and bitcoin, rebalanced on signals, trading some upside for a smoother ride.
None is objectively “best.” Each is a different answer to the same question: how much risk can you take and still stay invested?
The distinction matters because of what actually drives investors out of a strategy. Losses large enough to break conviction do far more damage than a stretch of disappointing returns. Return dispersion across these strategies is real, yet drawdown dispersion is what proves decisive in practice. A well-sized allocation can absorb volatility and still capture the long-term upside, while an oversized one can fail even when it holds the “right” asset, simply because it cannot be held through its own decline.
For any allocator, then, the primary decision concerns size more than selection: how much bitcoin a portfolio can carry without breaking under stress, and whether a raw bitcoin position or a more disciplined expression of the same conviction is what truly belongs in the book. Read the full report.
Headlines of the Week
The dominant theme in the cryptocurrency space remains the migration of blockchain technology into regulated financial-market infrastructure. DTCC conducted live tokenized-securities transactions with major Wall Street firms, while the U.S. and U.K. moved toward coordinated rules for tokenized finance.
- DTCC moves tokenized securities into live Wall Street trading: The Depository Trust & Clearing Corporation (DTCC) processed live production transactions involving tokenized equities, ETFs and U.S. Treasuries with participants including JPMorgan, Goldman Sachs, BlackRock and Vanguard.
- U.S. and U.K. unveil joint roadmap for tokenized finance: The two governments released a 10-point plan covering tokenized securities, cross-border stablecoins and digital-money infrastructure. Regulators will explore coordinated settlement rules, tokenization pilots and the use of stablecoins or tokenized money-market funds as collateral.
- Japan formally reclassifies crypto as a financial asset: Japan approved legislation shifting cryptocurrencies from a payments-focused regime into its financial-instruments framework.
- Bank of Korea prepares live CBDC transactions with nine banks: South Korea’s central bank will begin the second phase of its digital-won pilot in September, with major lenders issuing and managing tokenized bank deposits over central-bank infrastructure.
- U.S. crypto market-structure legislation encounters renewed Senate resistance: Several Senate Democrats hardened their opposition to the Clarity Act, arguing that it must include stronger restrictions addressing government officials’ crypto interests.
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Crypto Flows, Share and the Selective Rotation
Crypto Flows, Share and the Selective Rotation
Markets repositioned since June, but Binance held share (~55% reserves, ~24% spot) and drew net inflows in early July while the tracked market saw outflows.
37 minutes ago
Markets repositioned since June, but Binance held share (~55% reserves, ~24% spot) and drew net inflows in early July while the tracked market saw outflows.
Why it matters:
Markets repositioned since June, but Binance held share (~55% reserves, ~24% spot) and drew net inflows in early July while the tracked market saw outflows.