Cryptocurrency analyst Sebastian Higgs has sounded the alarm about a new trend in the crypto market that he believes poses a systemic risk. Higgs, who is the co-founder and COO of self-custody software provider Cordial Systems, expressed his concerns in a recent interview.
According to Higgs, the focus on exchange-traded funds (ETFs) launched by traditional financial institutions is misguided. Instead, he believes that the overall operating conditions of the crypto market need to be improved. Higgs pointed to the collapse of FTX as a key factor in the recent cryptocurrency winter, suggesting that there are several factors that could contribute to a market recovery.
While some advocate for increased regulation, transparency, and oversight processes, Higgs believes that this approach can be isolating and overlooks significant potential for development. He criticized the tendency to simply replicate the traditional financial system, arguing that this approach ignores unique opportunities in the crypto market.
One concerning development highlighted by Higgs is the rise of restaking platforms, particularly for tokens like Ethereum (ETH). These platforms allow staked assets to be staked again on different programs, increasing their utility and potential rewards. However, Higgs warns that this practice introduces the worst aspects of traditional finance, such as rehypothecation, into the crypto market. He believes that this could have a negative impact over time.
Higgs’s views on the risks of restaking platforms are shared by many other institutions. He describes liquid restaking as a combination of financial and technical risks, highlighting the market’s risky pursuit of innovation.
It’s important to note that this article does not constitute investment advice.