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Crypto markets are reeling from a fresh wave of volatility, with liquidations piling up as risk assets tumble.

Technical breakdowns have shaken leveraged positions, while former President Donald Trump’s surprise comments on a "crypto strategic reserve" briefly pushed prices higher before fading.

"This market has been volatile," said Imran Lakha, founder of Options Insight, in the latest episode of Deribit’s Crypto Options Unplugged podcast . "Trump comments over the weekend about a crypto strategic reserve made the market gap higher, but this move was faded quickly as risk assets melt down on more trade war concerns."

David Brickell, Head of International Distribution at FRNT, pointed to a macro regime shift driving markets.

"We are transitioning from this fiscal dominance that’s kept rates higher and inflation elevated. Now we’ve got a U.S. administration talking about reducing deficits — from 7% down to 3%," he said, adding that the shift is triggering a major unwinding of leveraged momentum trades.

Bitcoin, Nasdaq, and Trump trades unwind

Markets have seen a sharp correction, with previously popular trades reversing course. "A lot of Trump trades — short bonds, long dollar, long Bitcoin, long Nasdaq, and all the tech stocks — they’re all blowing up right now," said Brickell. "You’re seeing the momentum trade unwind, and that leverage unwind is driving broad de-risking."

Bitcoin has shed 15% from its highs, and traders are scrambling to hedge against further downside.

"I’ve been systematically rolling things to maintain a hedge," said Lakha, explaining how he adjusted his strategy. "I actually added a little bit to the hedge before we broke 92K, and then I started monetizing as we moved down toward 80K."

Institutional adoption and prime brokerage's role

Beyond the immediate market turbulence, a panel discussion on prime brokerage shed light on the evolving crypto market structure.

Mike Higgins, CEO of Hidden Road International, explained how prime brokers provide liquidity and balance sheet support, particularly in an environment where crypto exchanges require pre-funded accounts.

"If you look at the infrastructure in crypto, it was very much designed early on by retail. These exchanges are all pre-funded, which by definition makes this market capital inefficient," Higgins noted.

Sean Lawrence, Head of Europe at LTP, echoed this, noting the shift toward a more traditional finance structure in crypto.

"From our perspective, what we’re seeing is kind of an evolution of the trading model where crypto has started to get more of a TradFi feel. We're seeing people try to adopt best practices from the traditional market into crypto," he said.

He also pointed out that "a lot of people talk about prime brokerage in crypto, and I think one of the big differentiators is understanding that prime broking in this space is still developing. It's not exactly what we see in traditional markets yet, but it's getting there."

Brickell believes prime brokerage is essential to bridging crypto-native markets with traditional finance. "There’s a gap between our ecosystems, and risk is not being efficiently distributed," he said, noting the fragmentation between crypto spot markets and TradFi products like Bitcoin futures on CME.

Are institutions ready for crypto?

Despite optimism about institutional adoption, challenges remain. "My phone isn’t ringing off the hook for CCPs (Central Clearing Parties), so I think we’re still early," said Tommy Doyle, European head at FalconX.

Higgins echoed the sentiment, noting that infrastructure improvements are still needed before traditional finance fully embraces digital assets. "Institutions have been waiting on the sidelines because of a lack of safe, convenient ways to access the market."

"We just need to be really cautious around position sizing," added Brickell. "Ride out the de-risking, and wait for the new regime to take hold."