Podcast Summary: "Bitcoin’s Volatility Bubble Just Popped! Caitlin Long Explains The New Paradigm"

Podcast: The Wolf Of All Streets
Host: Scott Melker
Guest: Caitlin Long, CEO of Custodia Bank
Release Date: October 5, 2025

Overview

In this episode, Scott Melker sits down with Caitlin Long, CEO of Custodia Bank and a leading voice in digital asset finance, to discuss the seismic shifts in the Bitcoin market. The heart of their conversation: bitcoin’s days as the world’s most volatile asset may be ending, a “volatility bubble” has deflated, and new institutional players and regulatory regimes are creating a fundamentally different landscape for crypto. They dive deep into the implications for treasuries, tokenized dollars, stablecoins, regulation, and why these tools may function as a Trojan horse for Bitcoin’s integration into global finance.

Key Discussion Points & Insights

1. End of Bitcoin’s Volatility Era

• The Shift:
  Caitlin Long argues that the “volatility bubble,” not a price bubble, has popped for Bitcoin due to the influence of treasury companies and institutional activity.
  • Quote: “The bubble was in volatility... Everybody was pursuing the same strategy.” (00:31, 10:26, Caitlin)
• Institutional Impact:
  Financial engineering by Wall Street has fundamentally transformed the market, leading to lower volatility and market maturation.
  • Quote: “These bitcoin treasury companies have crushed bitcoin volatility... It’s very unusual now.” (00:10, 08:21, Caitlin)
• Changing Hands:
  Long-term, legendary holders (“hodlers”) are finally waking and selling, transitioning coins from early adopters to new institutional hands.
  • Quote: “Long-term hodlers have awakened, and when they move their coins, they sell them.” (00:44, 05:41, Caitlin)

Notable Segment:

• Discussion on the Glass Half Full vs. Glass Half Empty perspective of old holders selling (06:09–07:04).

2. The “Bitcoin Treasury” Trend: Financial Alchemy & Arbitrage

• The Treasury Play:
  Firms like MicroStrategy pioneered financial engineering strategies leveraging bitcoin’s volatility. However, widespread adoption of this approach ended the inefficiency—and the opportunity.
  • Quote: “Saylor… is helping the space in one regard, he’s creating a bitcoin yield curve... that’s the lasting impact of all this.” (20:32, Caitlin)
• Harvesting Volatility:
  The spread trade and convertible notes schemes that thrived on bitcoin's swings have lost their effectiveness as more companies enter the space and arbitrage away excess returns.
  • “The arbitrage never lasts forever... opportunities never last.” (17:30, Scott)
• From Hedge to Treasury:
  Clarification on the difference between true treasury allocations (using profits for BTC on the balance sheet) versus hedging or speculative leverage strategies.

Notable Segment:

• Bitcoin yield curves, derivatives markets, and the difference between pure-play treasuries and volatility plays (18:44–22:20).

3. Stablecoins and Tokenized Dollars: The Trojan Horse

• Mass Adoption Underway:
  The explosive growth of stablecoin usage is poised to transform global payments and settlement, potentially outpacing legacy systems like ACH.
  • Quote: “Stablecoin volumes are off the charts… this is going to fundamentally transform the traditional financial system.” (47:06, Caitlin)
• Tokenization’s Promise:
  Long explains how integrating tokenized dollars and deposits directly into the banking core could abstract away complexity and reduce costs for end-users and commerce.
  • Quote: “All that complexity in the background is going to get abstracted away.” (52:57, Caitlin)
• Regulatory Hurdles:
  The Fed’s lingering anti-crypto policies, “Operation Chokepoint 2.0,” and bank resistance are slowing—but not stopping—adoption.
• Future Vision:
  The next five years will bring consolidation in banking, abstracts of blockchain complexity for consumers, and the erasure of legacy friction in finance.
  • “Blockchains, stablecoins, will become completely commoditized and abstracted away...” (54:38, Scott)
  • “I think ACH within five years just dies on the vine because people will just be walking away from it.” (52:53, Caitlin)

4. Regulation, Operation Chokepoint 2.0, and Political Forces

• Continued Banking Resistance:
  Many crypto companies still face debanking and regulatory roadblocks, with high-profile denials and account closures ongoing.
  • “Operation Chokepoint 2.0 is not over yet... I just talked to a CEO yesterday who had just been debanked.” (27:40, Caitlin)
• Political Power Plays:
  The conversation dives into the complex dance between the Fed, the Trump administration, and the future of crypto regulation. Trump’s relationship with the Board of Governors, FOMC, and prospects for Executive Orders and firings are dissected in detail.
  • Key chess moves for control of the Fed are explained (30:14–35:51, Caitlin).
• Government Overreach & Pushback:
  Caitlin shares the harms experienced by her own and allied businesses due to regulatory capture and intransigence.
  • “No one's in jail... because of sovereign immunity, the individuals who abuse their government power aren't going to ever be held accountable.” (44:18, Caitlin)
• Potential Path Ahead:
  Executive action, agency shutdowns, and restructuring of the government apparatus may mark the coming years, with crypto at the center.

5. Banking, Tokenization & Custodia’s Role

• Custodia Bank’s Advances:
  Caitlin reports that Custodia is pushing forward with tokenized bank deposits in partnership with Vantage Bank, building the infrastructure for banks to participate safely in digital assets.
  • “There is news, but we will soon announce it... when you get those primitives inside the banks, they can build on them.” (48:17, Caitlin)
• Integration & Opportunity:
  The goal is not to supplant banks, but future-proof them—enabling them to benefit from the stablecoin revolution and to position themselves for a world of tokenized securities.
  • “ACH within five years... people will just be walking away from it.” (52:53, Caitlin)
  • “When we can talk about it, folks will realize it's something really special and it brings tokenization into the core of the banking system.” (59:36, Caitlin)
• Trojan Horse for Bitcoin:
  Caitlin and Scott agree: as tokenized deposits and stablecoins proliferate, they may actually be the “Trojan horse” for mainstreaming Bitcoin, rather than Bitcoin itself.
  • Quote: “Maybe stablecoins and tokenized bank deposits are the Trojan horse for Bitcoin.” (61:05, Scott; 61:05, Caitlin)

Memorable Quotes & Moments

• On The Volatility Bubble
  “The bubble was in volatility... it wasn't in the price, it was in the volatility, which got crushed because everybody was pursuing the same strategy.”
  — Caitlin Long (00:31, 10:26)

• On Legacy Holders Selling
  “Long-term hodlers have awakened, and when they move their coins, they sell them.”
  — Caitlin Long (00:44, 05:41)

• On Bitcoin's Institutionalization
  “It's just people saying it reached a magic number... It’s so much money... their concentration of wealth in one asset class that’s still, let’s be honest, largely experimental.”
  — Caitlin Long (07:04, 07:06)

• On the Stablecoin Surge
  “Stablecoin volumes are off the charts and anybody who thinks this is not going to fundamentally transform financial system is just praying for regulatory capture to bail them out. And it’s not going to happen.”
  — Caitlin Long (47:06)

• On Technology Becoming Invisible
  “All that complexity in the background is going to get abstracted away... if the engineers do their jobs well, they’ll abstract away all that complexity.”
  — Caitlin Long (52:57)

• On the Coming Transformation
  “The next five years are going to be so much fun because the amount of change that's coming is just staggering... It's going to be bringing down the cost of financial services.”
  — Caitlin Long (59:36)

Timestamps for Key Segments

• 00:00 – 01:06: The volatility bubble in Bitcoin and legendary holders selling
• 03:11 – 05:41: “Uptober” and the mechanics of treasury strategies
• 08:21 – 10:26: How Wall Street crushed volatility and the end of easy treasury arbitrage
• 14:27 – 17:23: Stablecoin yields, leverage, and protocol risk
• 18:44 – 22:21: Defining treasury companies, yield curves, and MicroStrategy’s legacy
• 27:36 – 33:48: Operation Chokepoint 2.0 and ongoing regulatory struggles
• 35:51 – 41:41: Trump, Fed power, regulatory change, and political dynamics
• 47:06 – 54:38: The coming dominance of stablecoins and tokenized deposits
• 59:36 – 61:49: How tokenization changes everything, with Custodia at the forefront
• 61:05: “Maybe... stablecoins and tokenized deposits are the Trojan horse for Bitcoin.”

Conclusion

This episode delivers a deep, timely diagnosis of the new Bitcoin and crypto landscape from one of its sharpest operators. Caitlin Long’s insights anticipate rapid, structural industry change—driven not by hype or price, but by the convergence of institutional engineering, tokenization, and macro-political shifts. For listeners seeking to understand not just where Bitcoin is, but where it’s going in the financial order, this is essential material.