In a recent interview, Sebastian Higgs, co-founder and chief operating officer of Cordial Systems, a company that provides enterprise-grade self-custody software, voiced concerns on the state of the cryptocurrency industry.

According to Higgs, the emphasis placed on exchange-traded funds (ETFs) by conventional financial institutions (TradFi) is misguided, and the general state of the cryptocurrency market's operations has to be improved.

Higgs brought up FTX's collapse, which was a crucial factor in the beginning of the most recent cryptocurrency winter.

"The market recovery could be attributed to several factors,"

he stated. Although a lot of people stress the value of more regulation, openness, and oversight procedures, Higgs thinks this strategy can be a little alienating.

"Systemic Risk Is Created by Restaking Protocols"

A discernible change in the composition of the market and an increasing divergence between asset custody and trading centres," Higgs stated.

Higgs did point out, though, that it can be difficult to forecast exactly what improvement will involve.

Higgs criticised the strategy of merely mimicking the established financial system, claiming that this method misses a huge opportunity for advancement.

Like many other analysts, Higgs issued a warning, predicting that the growth of restaking platforms for tokens like as Ethereum (ETH) has brought rehypothecation—one of the worst parts of TradFi—into the crypto market, where he believes it will eventually have detrimental effects.

Restaking increases an asset's usability and reward potential by enabling previously staked assets to be staked again on a different platform or programme.

Through this procedure, other decentralised protocols can leverage already staked assets, offering more opportunity for rewards to stakeholder and validators alike. Renzo, Eigenlayer, and Ether.fi are a few well-known restaking platforms.

According to Higgs, "my perspective on liquid investing, which is shared by many other institutions, is that it presents a real combination of risk, both financial and technical."

"Those are words I never would have imagined speaking, and it demonstrates the absurdity of the market's questfor novelty."