The market coverage pressure of the crypto market has turned certain instruments into outlets.

According to Tom Lee, President and CEO of BitMine, the crypto industry is facing a deeper structural crisis than it appears on the surface. The main cause lies in the lack of efficient hedging mechanisms to manage systemic risk.

When Institutional Traders Seek Protection

The situation has become critical because institutional investors lack viable alternatives to hedge their long positions in bitcoin and ethereum. Crypto derivatives markets, despite their expansion, show insufficient liquidity to move significant capital. As a result, traders have turned to alternative solutions: shorting highly liquid listed securities that serve as proxies for digital assets.

According to Lee, this dynamic has become the primary risk management mechanism in the sector. He explained in an interview with CNBC: “When crypto market participants try to protect against losses on their positions, they find that their hedging capacity with traditional instruments is very limited. The most practical solution remains shorting assets with extremely liquid options chains.”

The Impact on Market Liquidity

The consequences of this trend are visible in the markets. A certain stock strongly correlated with bitcoins held by companies in the sector has contracted by 43% in the last month, reflecting the accumulated hedging pressure. With nearly 650,000 bitcoins in its portfolio, the stock’s price remains closely tied to bitcoin fluctuations, making it the most effective proxy asset for those seeking to reduce crypto exposure.

Emerging Structural Problems

Lee emphasized that the critical event on October 10 further worsened the situation. That day’s crash wiped out $20 billion in market value and destroyed liquidity in trading venues, hitting market makers — whom Lee calls the “central bank” of the crypto market — hard. Since then, fractures in the system remain unresolved.

Insufficient liquidity is not only an issue for bitcoin and ethereum but also extends to alternative assets and sector-related securities. This shortage reflects a broader reality: the crypto market lacks mature infrastructure for institutional risk management.

A Temporary Outlet

Currently, certain listed stocks have become the main instrument through which the crypto market unloads hedging pressure. This is not a structural solution but rather a symptom of the underlying fragility of the system. Lee warned that this situation reveals much more serious problems: the market lacks native mechanisms necessary to absorb and distribute risk efficiently.

In the current bearish phase, this dynamic will continue to exert pressure on bitcoin proxy assets until the market develops more sophisticated and liquid hedging infrastructures.