Custodia Bank CEO Caitlin Long stated that institutional investors in the traditional financial sector lack updated risk tolerance models to cope with cryptocurrencies and may face difficulties in the next bear market.

Long told CNBC at a Wyoming blockchain seminar: "Large financial institutions are largely involved and driving the development of this cycle. I doubt they will do so this time."

Long pointed out that traditional financial institutions are accustomed to tolerating significant leverage due to built-in safety measures, such as discount windows and other fail-safes.

However, she warned that these advantages disappear in cryptocurrencies because settlement occurs in real-time. She noted that the differences between the two could bring liquidity crises to these institutions:

"These fail-safes are designed due to the inconvenience of real-time updates in traditional systems. In cryptocurrencies, everything must be real-time, and the nature is completely different."

"I worry about how these financial giants will cope when the bear market arrives. I know some people optimistically believe there won't be another bear market. I've been involved in this field since 2012, so I know bear markets will come again," she added.

Institutional investors, including cryptocurrency treasury companies, are the main driving force of the current market cycle.

Some investors see this as a positive development for adoption, while others warn that excessive leverage and inexperienced companies will sell off cryptocurrencies in the next bear market, triggering a chain crisis in the financial system.

Custodia CEO responds to widespread concerns from industry executives and analysts

Investment company CoinFund President Chris Perkins said, "The biggest systemic risk in the future is that one ecosystem manages risk and rebalances in real-time, while another takes breaks on weekends, nights, and holidays."

This mismatch in settlement mechanisms can lead to liquidity issues, and liquidity problems are the root cause of financial crises.

In June, venture capital firm Breed released a report stating that most new bitcoin treasury companies will not survive the next market downturn.

The company warns that excessive leverage and falling asset prices will create a vicious cycle, forcing companies to sell assets and further depress the market.