Crypto faces 3 barriers to next bull run, STS Digital CEO says

Institutional investors selling options, capital rotating into artificial intelligence and delays to U.S. crypto legislation are three of the powerful headwinds holding back price gains in digital assets even as Wall Street steadily embraces blockchain technology, according to STS Digital CEO Maxime Seiler.

Bitcoin BTC$62,554.89, the largest cryptocurrency, has struggled in recent months despite record institutional adoption of blockchain, dropping more than 25% this year. Seiler argued that markets have yet to fully price in the rapid integration of the technology across traditional finance.

“The last four years have seen record institutional adoption of crypto and digital asset technology,” Seiler said in an interview with CoinDesk. “What has changed over the past two years is that institutions are increasingly using blockchain to upgrade traditional financial markets to operate 24/7.”

Banks, exchanges and brokers are working through the operational challenges of around-the-clock markets, including clearing, settlement and margining, he said. Companies such as Kraken and Coinbase (COIN) are accelerating that transition as they expand beyond crypto into broader financial services.

Much of the adoption, however, benefits established financial institutions rather than token holders, Seiler said. As traditional finance integrates blockchain tech into existing workflows, less value accrues directly to crypto assets than investors expected several years ago.

Founded in 2021, STS Digital is a Bermuda-regulated crypto options market maker that provides 24/7 liquidity and pricing for institutional clients trading digital asset derivatives. The firm specializes in over-the-counter (OTC) trading.

AI, regulation add to crypto headwinds

Another barrier to growth is artificial intelligence. Investor enthusiasm for AI has diverted both attention and capital away from crypto, Seiler said.

High-profile developments around companies such as OpenAI, Anthropic and the SpaceX (SPCX) IPO have made AI the market’s dominant growth narrative, according to Seiler.

He also pointed to delays in U.S. market structure legislation, including the Clarity Act, as another factor weighing on sentiment.

Regulatory certainty would help to accelerate traditional finance’s shift toward 24/7 trading and settlement, while creating a more constructive backdrop for digital assets, he says.

Options selling caps volatility

Seiler also said the rapid growth of the institutional crypto options market is suppressing bitcoin’s price volatility.

Bitcoin’s implied volatility has remained unusually subdued in recent months, with the BVIV Index, a measure of expected 30-day volatility derived from bitcoin options, falling into the mid-30% range in recent months, among its lowest levels of the current cycle, before beginning to edge higher in July.