This Crypto Winter is Different: How Will It Affect the Traditional Financial System?

Jakarta, Pintu News – The current crypto winter seems to be more severe than ever. Ken Brown, finance editor at The Information, reveals that the increasingly close links between crypto and the traditional financial system could make it worse.

This engagement creates greater risk during market downturns. Brown emphasized the importance of understanding this new dynamic to see how it impacts the global economy.

Key Weak Points

According to Brown, one of the major weak points in the relationship between crypto and traditional finance is the widespread use of stablecoins. Stablecoins, which are often used as currency substitutes in economically unstable countries, are now becoming systemically significant. Reliance on stablecoins increases risk in the event of a market panic or large-scale withdrawal of funds.

Stablecoins like USDC (USDC) issued by Circle are a clear example. Circle deposited billions of dollars in Silicon Valley Bank, which collapsed due to losses on its assets. This incident shows how fragile the relationship between crypto products and traditional financial institutions can be, which can trigger a domino effect throughout the system.

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Interconnection with Stock Market

The interaction between the crypto market and the stock market is a major highlight in Brown’s analysis. Today, many cryptocurrencies are integrated into the stock market, allowing crypto price fluctuations to significantly affect the stock market. This adds to the complexity of managing financial market risk.

In addition, large companies such as MicroStrategy have invested large amounts in Bitcoin (BTC), which affects the price dynamics. When the price of Bitcoin drops, this affects not only MicroStrategy but also investors and the stock market as a whole. This interconnectedness creates greater potential risk in the event of a sharp drop.

The Role of Regulators and the Future of Crypto

Global financial regulators are now more wary of the risks that crypto poses to the traditional financial system. Brown emphasized that this is a test for regulators to assess and manage the risks. How they respond to this situation will determine the future direction of crypto regulation.

This increased scrutiny could impact the way crypto companies operate and interact with traditional financial institutions. This is a critical moment that will show how resilient the current financial infrastructure is to pressure from crypto markets. Market watchers and investors should watch these regulatory actions as important indicators.

Conclusion

This crypto winter marks an important period in the evolution of crypto markets and their relationship with the wider financial system. With the challenges and risks involved, a deep understanding of these dynamics is essential for anyone involved in finance, be it in the crypto or traditional sector. Attention to regulatory actions and market responses will be key in navigating this uncertain period.

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FAQ

Q1: What is crypto winter?

A1: A crypto winter is a period where the value of the crypto market experiences a significant and prolonged decline, often triggered by various economic and regulatory factors.

Q2: How can the interplay between crypto and the traditional financial system affect the global economy?

A2: These linkages increase systemic risk as problems in one sector can quickly spread to other sectors, potentially leading to broader financial instability.

Q3: Why would a stablecoin like USDC be systemically significant?

A3: Stablecoins are used as currency substitutes in economically unstable countries, and a high reliance on stablecoins may introduce risks in the event of a market panic or massive withdrawal of funds.

Q4: What is the role of regulators in the current crypto context?

A4: Regulators have a critical role in assessing and managing the risks that crypto poses to the traditional financial system, as well as determining the future direction of crypto regulation.

Q5: How should investors and market watchers respond to the current situation?

A5: They should pay attention to regulatory actions and market responses as important indicators to navigate this period of uncertainty, as well as understand the risks involved.

Reference

• U.Today. Will This Crypto Winter Be Different? Top Analyst Explains. Accessed on November 27, 2025