Bitcoin (BTC) Has 'No Lender of Last Resort', 22-Year Wall Street Veteran Warns

  • Crypto assets and newly developed security tokens offerings (STOs) give more "choice" to investors regarding where they want to store their assets, Wall Street veteran Caitlin Long noted.
  • Crypto investors who do not control the private keys to their digital assets are at risk, even if the funds are managed by established Wall Street firms, Long said.

Caitlin Long, a 22-year Wall Street veteran who has reportedly been following Bitcoin’s (BTC) ongoing development since 2012, recently took to Twitter to release an update on the “latest interaction” between Wall Street and cryptocurrencies.

According to Long, the most significant, or relevant, news “on the Wall Street front” is tZERO’s “token generation event” held on October 12th - as it is one of the first fully-regulated securities token offerings (STO) conducted on the Ethereum blockchain.

More "Choices" For Investors

Long explained that tZERO’s digital tokens “of true preferred stock” had been issued by a US Securities and Exchange Commission (SEC) registrant. She added: “the true benefit of owning crypto assets … [is that] investors have the option to opt out of the legacy system, which is unstable [and] unfair.”

Notably, Long has been critical of the traditional financial system as she has previously pointed out its numerous inefficiencies and drawbacks. In her tweet storm, the Harvard law school graduate wrote that “owners can either hold tokens at a broker/dealer" or in their crypto wallets. She thinks:

This choice will keep Wall Street honest since every owner can always withdraw coins to their own wallet [and] directly own the property if they so choose.

Caitlin Long

She added this is quite important because it gives investors “a choice” as to where they want to keep their financial assets. 

As CryptoGlobe reported on October 15th, Fidelity Investments, one the world’s largest financial services firms with over $7.2 trillion of assets under management, announced it will begin offering "enterprise-quality custody and trade execution services" for digital currencies.

Fidelity’s crypto-related services will reportedly be available by 2019, and will focus on encouraging more institutional investors such as “hedge funds, family offices and market intermediaries" to invest in digital assets. Commenting on this development, Long said that she will be carefully reviewing the details related to Fidelity’s cryptocurrency related products.

Warning To Investors

Notably, Long thinks Fidelity’s crypto platform will most likely be “a lot safer for [small] investors than one built by a taxpayer-backed or Fed-backed firm.” Going on to caution investors of the potential risks in the nascent digital currency markets, Long said that even established Wall Street firms may not be able to protect consumers from the volatile nature of the emerging asset class.

She warned her followers:

Beware there is no lender of last resort for bitcoin, so a run-on-the-bank or hard fork (backwards incompatible upgrade to a cryptocurrency) could cause major losses if your Wall Street counterparty turns out not to be 100% backed by on-chain bitcoin. I expect losses from operational problems at some point. Do your homework about risks, fiduciaries!

Caitlin Long

She added:

[Cryptocurrency ‘hodlers’] who hold their bitcoin [assets’] private keys will enjoy the short squeeze.

Caitlin Long