Dear Crypto: If You Want to Beat Wall Street, Spice Up Your Treasury Management Game



You heard it folks, the big guns of Wall Street are stepping into the crypto world, shaking things up for the indigenous inhabitants of the digital asset market. It’s a sink-or-swim moment for these relatively new crypto-native institutions. If they want to keep riding the wave of success and compete with their traditional counterparts, they better start taking a page from Wall Street’s book and get serious about treasury management.

Let’s face it, regulators have their eyes glued to the crypto realm. Any misstep in fund management is like waving a red flag at a bull (yes, the regulatory authorities). It invites even stricter scrutiny. Crypto companies, in this ever-evolving financial landscape, need to not only consider their own interests and ensure sound financial management practices, but they also have to be vigilant of the watchful gaze of regulatory bodies.

So, what can we learn from the past to navigate these treacherous waters? The last decade has taught us a valuable lesson: early-stage crypto startups suffered excruciatingly due to financial, managerial, and legal shortcomings. These pioneer institutions honed their survival skills through the fog of financial mishaps, regulatory challenges, and scandalous debacles.

Remember the collapse of Terra and LUNA in May 2022? It was dubbed the first major crypto bank run, signaling a disaster that rocked the entire industry and exposed major flaws in managing counterparty risks. And let’s not forget the bankruptcy of crypto exchange FTX in November 2022. It was a vivid example of poor financial management. Many clients of crypto startups were also guilty of risky financial behavior, exacerbating the issue. Instead of diversifying their funds across different exchanges or self-managed accounts, they entrusted all their assets to FTX, magnifying the impact of the collapse. These incidents vividly underscore the need to enhance risk management and diversification strategies in the crypto ecosystem.

While the crypto industry has made progress in regulatory compliance, security measures, and investor protection, these events, along with others that have occurred worldwide, highlight the dire need for substantial improvements in treasury management practices.

Now, let’s take a look at what Wall Street can teach us. Effective treasury management is the key to success for crypto institutions. At its core, treasury management involves cash flow management, risk assessment and mitigation, strategic asset investments, and ensuring compliance with regulatory reporting protocols. Sounds dry, I know. But given the unique challenges that crypto companies face, including extreme market volatility, regulatory uncertainty, and thorny liquidity management, they need to strategize to maintain financial stability while battling the growing threat from Wall Street financial giants eager to snatch their survival.

The persistent uncertainty in the crypto world highlights the importance of sound treasury management practices, including diversification, risk assessment, and hedging strategies. Diversifying assets and implementing robust risk assessments can help alleviate the inherent volatility in the crypto arena, while effective hedging provides an extra layer of protection. No fancy innovation can replace these core financial principles.

The same principles from traditional financial asset management practices can be directly applied to the crypto realm. For crypto institutions, a crucial step is adopting a risk-based approach to treasury management, systematically evaluating potential risks and rewards to make prudent decisions aligned with their objectives.

Collaborating with third-party vendors also plays a vital role in treasury management services, including cash management and risk reduction. Leveraging the expertise and resources of individuals or organizations can provide a competitive advantage. Let’s also not forget the importance of synergy between financial professionals and technical experts. Collaboration enhances the efficiency of treasury management, and the fusion of multiple disciplines can propel businesses to comprehensive success.

If native crypto companies don’t take a more proactive approach to treasury management, the ever-growing crypto market will struggle to sustain itself. By blending traditional financial wisdom with the unique dynamics of the crypto world, businesses can build a solid financial framework to navigate uncertainty and seize opportunities.

Fail to do so, and crypto companies risk falling into the same pitfalls, leading to financial instability, eroded user trust, and ultimately, their demise.

So dear Crypto, it’s time to put your treasury management game face on and show Wall Street what you’re made of. After all, humorously managing digital assets is what you do best, isn’t it?

Let’s continue the crypto revolution with a dash of humor and financial prudence!

We will continue to update 算娘; if you have any questions or suggestions, please contact us!


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