When Bitcoin gained about 23% in a single week in late August, the biggest weekly move in more than three years, the driver wasn’t a protocol upgrade or a token narrative. It was a Treasury bond buyback, falling long-term yields and a short squeeze. Vanessa Grellet, Co-Founder and Managing Partner of Arche Capital, explains why that distinction matters.
In this interview with PaySpace Magazine, Co-Founder and Managing Partner of Arche Capital, former NYSE executive and author of Digital Assets and Crypto for Investors, Grellet discusses the widening gap between Bitcoin and other tokens, the rise of tokenization inside conventional funds, the stalled US market structure bill, and why cash settlement remains the biggest obstacle to institutional adoption.
- In late August, Bitcoin posted its strongest weekly move in more than three years, and the drivers for that were largely macro and liquidity mechanics rather than crypto-specific news. Do these changing dynamics tell us anything meaningful about the whole asset class or one crypto token in particular?
They tell us more about Bitcoin than about “crypto” as a single asset class.
That week was a liquidity event, not a crypto story. Bitcoin rose about 23% in a single week in late August, one of its largest weekly dollar gains on record. The drivers were the Treasury’s bond buyback announcement, lower long-term yields, strong ETF inflows and a short squeeze, not a protocol upgrade or a token narrative. That is macro and positioning.
Two things are true about Bitcoin at the same time. It is the debasement trade: a scarce, globally transferable, non-sovereign asset with a simple monetary rule, which some allocators use as a diversifier or a hedge when monetary conditions loosen. It is also the liquidity trade and the beta of the digital asset market. When liquidity turns favorable, Bitcoin is the asset institutions can actually access at scale, most easily through spot ETFs, and that is why it leads. When Bitcoin leads, other tokens usually follow, but they follow on beta, not because their own investment case suddenly improved.
That is where the asset class splits, and the split is about characteristics, not a value judgment. Bitcoin is a monetary asset. Most other tokens have tokenomics, governance and cash-flow profiles that are different by design. They behave more like higher-beta, equity-like claims and can move much more than Bitcoin in both directions. In a liquidity rally they can outperform on the way up; when Bitcoin dominance rises and capital rotates back to the most liquid asset, they tend to fall harder. That extra move is higher beta plus idiosyncratic risk, the same pattern you see in early-stage equities compared with a reserve asset. It is not alpha, and it is not the same portfolio role as Bitcoin.
So the lesson is not that the asset class has matured. It is a divergence. Bitcoin is increasingly priced within the global liquidity system, as a debasement hedge, a liquidity trade and market beta, and it is the digital asset institutions can most readily access through ETFs. Other tokens can still belong in a portfolio, but in a different sleeve: infrastructure, networks and early-stage venture, not a second copy of Bitcoin. Those are two different decisions, and treating them as one risk factor is how investors get the sizing wrong.
- You’ve described a shift toward “crypto without the crypto” — investors gaining exposure to tokenized assets through products they already own. Do you think that approach is going to substitute ordinary digital asset trading in the future?
First, a clarification on what I mean by “crypto without the crypto.” It is about abstracting the complexity away from the end investor. On Robinhood, for example, you can buy Bitcoin in the same app where you hold your stocks, without opening a wallet, managing private keys or onboarding to a separate exchange. The blockchain is still there, but the investor no longer has to deal with it. That is a different phenomenon from tokenized assets, which mostly run the other way: they give crypto-native investors access to traditional assets like Treasuries, equities or gold in tokenized form, so they can trade them on-chain alongside their crypto holdings.
So will abstraction substitute ordinary digital asset trading? For most investors, yes, in the sense that it will become the default way they access crypto. People want exposure, not infrastructure. The same thing happened with gold, which many investors now own through funds rather than bars in a vault, and with Bitcoin itself, where spot ETFs brought in capital that was never going to use a crypto exchange.
What it won’t do is make the native layer obsolete. Self-custody, DeFi and on-chain trading remain essential for investors who want direct ownership, 24/7 composability or yield strategies, and they are the rails everything else is built on. In fact, the two trends meet in the middle. Brokerages are abstracting crypto for traditional investors, while tokenization brings traditional assets to crypto investors. Over time, the investor won’t care which side of that line an asset started on. They will simply see one portfolio, in one interface, with the complexity handled underneath.
- Franklin Templeton’s plan to use tokenized money-market holdings for cash positions or collateral inside conventional ETFs and mutual funds would put tokenized assets into portfolios whose owners never sought them out. Is this the model other major asset managers will now race to copy, and what does it signal?
Yes, this is the model, and it matters more than another crypto ETF.
Franklin isn’t asking anyone to “get into crypto.” It is using a tokenized version of a money-market fund, one of the safest assets there is, to hold the cash inside its regular funds or to post as collateral. The investor doesn’t see a token and doesn’t make a decision. They keep owning the same fund they already had. The difference is under the hood.
The reason others will copy it is straightforward. A fund’s cash earns the same money-market yield either way, but in tokenized form that cash can also move instantly, be used as collateral and be shifted where it’s needed with fewer intermediaries and less paperwork. Same return, more flexibility. Once one major manager has the regulator’s go-ahead, every other large fund company will be asked by its own investment committee why its cash can’t do the same. Each will still need its own approval, but the path is now visible.
What it signals is that tokenization has moved from a product you sell to a tool you use. Cash is the largest and most conservative part of the financial system, and if that part runs on blockchain rails, the plumbing of markets starts to change.
Most investors won’t make a deliberate choice to own digital assets. They will benefit from them through funds they already hold, without ever noticing. That is what mainstream looks like.
- Which is the biggest bottleneck still standing between where institutional crypto infrastructure is today and where it needs to be?
The question is no longer whether the technology works. It is whether regulated institutions can use it cheaply, privately and at scale. Banks and asset managers have moved from “we cannot do this” to “we can, if we build the right controls.” Four things still stand in the way.
The first and biggest is cash. Every trade has two parts: the asset moves one way and the money moves the other. We have become very good at putting the asset on-chain. A tokenized bond, fund share or stock can move in seconds, any day of the week. But the money often still travels through bank wires that wait for Monday. A trade is only as fast as its slowest part, so until cash moves as easily as the asset, one side is effectively lending to the other over the weekend.
Three solutions are competing to fix that. The first is stablecoins, where the Open USD consortium and groups of banks are building their own. The second is tokenized bank deposits, where JPMorgan’s Kinexys and Citi Token Services are already processing roughly $7 billion and $1 billion a day. The third is central bank money on-chain, which went live in Europe through the Pontes platform in September. None of these will win outright. The real prize is the layer that routes each payment to the best option depending on cost, speed and regulation.
The second is regulation. In the US, the market structure bill stalled in the Senate in September. That leaves open what the SEC oversees versus the CFTC, how assets must be held in custody and how much capital banks must set aside to hold them. That last point matters enormously, because capital rules decide whether banks can hold and trade these assets at all. Europe has a single rulebook in MiCA, while the US is building its rules piece by piece, agency by agency. Legal questions also remain. Would stablecoin reserves be protected if an issuer went bankrupt? Is a token claim enforceable across borders? And every serious system today still relies on central bank money and established law to guarantee that a completed trade is final. Until the rulebook is working, much of the banking system’s capacity stays on the sidelines.
The third is interoperability. Tokenized securities, tokenized deposits and stablecoins need to work together; otherwise we end up with walled gardens instead of one connected system. That risk is real: banks are building their own private token networks, and regions are adopting different rules. Common technical standards are the only defense, and right now they are voluntary. Private blockchains were the wrong answer. Public blockchains with the right controls are the right one, but we haven’t finished building those controls.
The fourth is privacy and security. No institution will run long-term strategies on a ledger where competitors can see every move. Privacy technology such as zero-knowledge proofs, better key management and institutional-grade security are not optional features. They are the entry ticket.
- Regulatory clarity on tokenization and crypto is increasingly seen as an adoption catalyst. What specific piece of pending regulatory action would unlock the next real wave of institutional capital, in your view?
The single most important piece is a US federal market structure law: one that draws a clear line between digital commodities, securities and payment stablecoins, and sets workable rules for how broker-dealers, banks and funds can hold and trade these assets.
A lot has already changed. Stablecoins now have a federal framework in the US, with implementing rules being finalized ahead of its January 2027 effective date, and that changed the compliance answer for many institutions. The accounting and supervisory obstacles that kept banks out have been rolled back. What is still missing is the market structure piece: who regulates what, how tokenized securities can be issued and sold in the US, and how custody works within existing fund rules and bank capital requirements.
The CLARITY Act was meant to deliver that, but it failed in the Senate on September 15. Within days, the regulators stepped in: the SEC granted an exemption for trading tokenized stocks on-chain, the CFTC issued no-action relief, and the Federal Reserve proposed stablecoin reserve and capital rules under the GENIUS Act. So Congress stalled, but the agencies moved. That is workable, but it is fragile, because agency rules can be reversed by a future administration.
The next wave needs certainty on three fronts: the cash, the asset and the counterparty. In practice, that means final rules on stablecoin reserves and how they are kept separate, so holders know their money is protected if an issuer fails. It means a tokenized securities framework the SEC and CFTC both agree on, so issuers aren’t caught choosing between two regulators. And most importantly, it means a law that makes these agency rules permanent. The CLARITY Act failed once, but it may come back.
- When markets move fast like Bitcoin in August, retail investor psychology tends to chase the number. What’s the disciplined portfolio-construction response to a move like this, versus the emotional one?
For most diversified investors, digital assets belong within the alternatives allocation, at around 1 to 5% of the portfolio, alongside other alternative exposures rather than as a replacement for equities, bonds or cash. The way I think about sizing is whether the portfolio could absorb a 60 or 70% drawdown without anyone having to sell other assets, change the plan or change their lifestyle. Beyond that, it becomes an active bet, and it deserves to be managed as one. It also shouldn’t sit next to money needed in the near term, and leverage has no place in it.
Dollar-cost averaging, or buying in predetermined tranches, takes the headlines out of the entry decision.
Rebalancing does the rest. A position that runs from 2% to 3.5% against a 2% target gets trimmed, and one that falls below its range with the thesis intact gets topped up. That mechanically sells strength and buys weakness, with no need to call a top or a bottom. It’s the most underrated discipline in this market, because crypto rewards people who ignore it, right up until it doesn’t.
It also helps to be clear about what actually moved. Bitcoin moved on macro. Much of the rest of the market moved because everything moved, and the long tail of smaller tokens is closer to venture capital. A liquidity wave lifts both, but it doesn’t validate the venture bets, and it’s no reason to shift the mix between them.
The allocation deserves a review once or twice a year, not every time the price jumps. Any disciplined process will look early, late and occasionally wrong along the way. The process is the product. Price says a lot about liquidity and very little about the thesis.
- Your upcoming book argues the debate has moved from “if” digital assets belong in a portfolio to “how” to get exposure, e.g. through public markets, private markets, or self-custody. Does a moment like the recent Bitcoin rally change which of those three paths makes the most sense for a typical institutional allocator right now, or does the “how” question stay constant regardless of price action?
The “how” stays constant. The book approaches digital assets from an investing perspective, not a trading one. A trader reacts to price moves; an investor builds exposure around long-term objectives. From that perspective, a rally does not change which path makes sense, because the choice is not a function of price. It depends on the type of exposure the allocator is seeking, their time horizon, their return expectations and the role digital assets are meant to play as a diversifier within the portfolio.
For a typical institutional allocator today, public markets remain the natural starting point. ETFs and listed companies tied to the sector provide liquid, regulated exposure that fits existing investment policies, reporting and governance. For allocators seeking something beyond beta, liquid funds add active management, and delta-neutral funds offer returns driven by market structure rather than price direction, which makes them a genuinely different diversifier.
Private markets serve a different objective: long-term exposure to the companies building the infrastructure of tokenized finance. That route requires a longer horizon and a tolerance for illiquidity, in exchange for venture-style return potential.
Direct ownership, including self-custody and DeFi, is the most specialized path. It suits institutions and individuals who want direct ownership and have the operational capabilities to support it. For most typical allocators, it is not the first step.
What the rally does is test whether each allocator’s implementation matches its objectives. ETFs absorbed significant inflows and allowed investors to act quickly. Delta-neutral strategies tend to benefit from the elevated leverage and funding dislocations the market experienced. For private funds, the impact on current valuations is limited, but exit windows tend to open in risk-on environments.
The debate has moved from “if” to “how” because the product landscape now allows investors to match almost any objective.
Vanessa Grellet is Co-Founder and Managing Partner of Arche Capital, a multi-strategy investment firm focused on digital assets and emerging technologies, with more than 20 years of experience spanning Wall Street and the decentralized ecosystem. A former New York Stock Exchange executive and early ConsenSys team member, she helped build core infrastructure powering Ethereum and now serves on the boards of the Enterprise Ethereum Alliance and Based AI. She is also the author of Digital Assets and Crypto for Investors (Wiley).
