Author: Andjela Radmilac

Translation: Deep Tide TechFlow

Deep Tide Guide: The ETF only solves the question of "how to buy Bitcoin," but no one has noticed that Wall Street is already using it for the same things it does with government bonds and gold: mortgages, insurance reserves, rated bonds. The clearing wave in February proved that this system can withstand pressure, but it also exposed the fatal flaws of lever chains collectively tripping over themselves.

Everyone knows about ETFs, but hardly anyone knows that while ETFs are draining all the attention, there are dozens of institutional products built around Bitcoin, ranging from a $40 million insurance reserve in Barbados to rated bonds sold to Wall Street investors by Jefferies.

The ETF only answered one question: how do retail investors and institutions hold Bitcoin within a regulated wrapper? The products in this article answer a different, arguably more important question: once you have Bitcoin, what can you do with it?

The answer is: the same things that the financial industry has always done with U.S. Treasuries and gold. You can use it as collateral to borrow money, use it as margin for trading, hold it as a reserve behind an insurance policy, or build a corporate balance sheet on top of it.

Assets that can do all of these things at once are sometimes referred to as financial primitives, which is a fancy way of saying "building blocks": widely accepted and easy-to-value things that the rest of the financial system can stack loans, bonds, and derivatives on top of. Treasuries attained this status because everyone agrees on their value and how to seize them if the trade goes wrong.

Bitcoin is now undergoing the same test, and the early results explain why some of the biggest participants in this market really, really don't care about price fluctuations.

Insurance Reserves, Consumer Credit, and the First Rated Bitcoin Bond

In March 2025, Tabit Insurance, an insurance company founded by former executives from the Bittrex exchange and licensed in Barbados, capitalized a property and casualty insurance agency with $40 million fully funded by Bitcoin.

Essentially, holders of Bitcoin surrender their coins to support real insurance policies covering storm damage and lawsuits against corporate directors, in return earning close to a 10% yield in dollars. The policies and premiums are maintained in dollars, so customers never touch cryptocurrency, while Bitcoin acts as a reserve that is used to pay claims if things go wrong.

Tabit holds a Class 2 license from the Barbados Financial Services Commission and is set up as a segregated account company, meaning each investor's fund pool is legally separated from others, so losses in one account do not deplete the capital of another account.

Regulators and auditors can also check reserves on the blockchain in real-time, providing more transparency than traditional insurance companies do in their quarterly reports. CEO Stephen Stonberg stated that the entire global reinsurance industry operates on about $800 billion of capital, while Bitcoin is a multi-trillion dollar asset class, so even a small portion of that wealth flowing into underwriting will be felt across the industry.

While insurance reserves are indeed a rather unexpected use case for Bitcoin, lending is where the money starts to get serious. How Bitcoin loans work sounds simple: you collateralize your coins with a lender, you receive dollars, and when you repay, you get your coins back.

Holders do this because selling triggers taxable gains and ends their exposure to future price increases, whereas borrowing against coins gives them cash without giving up either.

Trading volumes across platforms reached about $2 billion in 2025, with Toronto-based Ledn reporting it has issued over $9.5 billion since 2018, and major banks like JPMorgan are now rolling out similar products to their own clients.

In February 2026, this lending business stepped into the mainstream bond market. Ledn completed a $188 million securitization, meaning it bundled 5,441 loans into a pool and sold bonds, with interest payments coming from the borrowers' repayments.

The bonds were divided into two tranches: $160 million of senior notes receiving payment first, rated BBB- by S&P Global, which is an investment-grade rating and, for the first time in history, awarded to securities backed by digital assets, and $28 million of riskier subordinated notes rated B-, absorbing the first loss for a higher yield.

By crypto standards, the underlying figures are quite conservative. The 2,914 American borrowers in the pool owe $199.1 million but have collateralized about 4,079 BTC worth $356.9 million, which means the loan-to-value ratio is 55.8%, meaning they have collateralized nearly $2 of Bitcoin for every $1 borrowed.

Ledn CEO Adam Reeds stated that the structure created a "direct pipeline" between Bitcoin holders seeking liquidity and the world's deepest pools of institutional capital, while Bitwise's head of European research, Andre Dragosch, said the deal proves that traditional finance now views Bitcoin as legitimate, and even pristine, collateral.

The structure was almost immediately stress-tested, revealing the strength and vulnerability of the entire model. Bitcoin fell about 27% from mid-January to February 2026, pushing up the loan-to-value ratios of the entire pool and triggering margin calls, meaning that borrowers were automatically required to either add collateral or watch lenders sell it off.

Ledn ultimately liquidated about a quarter of the loans originally planned for the transaction. The sales still went through, partly because these automatic liquidations worked exactly as designed, and Ledn never suffered a loss from selling collateral due to default.

One reverse consequence to remember is: when many lenders are running the same triggers on the same volatile asset, a sharp price drop forces them to sell simultaneously, which further pushes down the price, triggering more sales. The system passed its first real test, which also revealed where it would crumble under enough pressure.

Collateral Networks, Arbitrage Trading, and Corporate Balance Sheets

Underneath these products, the basic mechanisms of the market are being rebuilt, looking more like money and bond markets, where the companies holding your assets, the platforms you trade on, and the systems settling transactions are three independent entities.

Anchorage Digital operates the only federally-chartered crypto bank in the U.S., launching its Atlas settlement network in April 2024 so that institutions can settle trades directly with each other without needing to park funds in custody accounts or pre-fund exchanges.

By March 2026, Atlas had connected nearly 600 participants, four times as many as a year prior, processed tens of billions of dollars in settlements, and expanded to managing collateral, meaning the bank now monitors loan positions, issues margin calls, and handles settlements on behalf of lenders.

Cantor Fitzgerald chose Anchorage and Copper.co for this role in March 2025 for its global Bitcoin financing business, while Copper's ClearLoop system allows trading firms to lock their coins in a custodian while still trading across multiple exchanges, ensuring that a repeat of the FTX collapse does not take customer assets.

All of this makes using Bitcoin as collateral as conventional and safe as providing Treasuries, which is a prerequisite for the expansion of all other content mentioned in this article.

A vast amount of institutional funds flowing through this mechanism has no opinion on Bitcoin whatsoever. Basis trading has been one of the most popular institutional strategies since the ETF launch, taking advantage of the fact that Bitcoin futures are often slightly above the spot price: funds buy spot Bitcoin or ETF shares while selling futures contracts at higher prices, earning the spread regardless of how prices change next, as the gains on one leg offset the losses on the other leg.

After the ETF provided a convenient way for funds to hold the spot end, hedge funds built record short positions in CME futures, where open interest rose from around 30,000 contracts in early 2024 to a peak of nearly 45,000 contracts in November of that year.

This trade grew large enough that its unwinding can now move the market by itself, as CME open interest fell below $10 billion in April 2026 due to these paired positions closing, and mechanical selling pushed prices lower regardless of anyone’s sentiment.

CME continues to build for this group, increasing 24/7 trading in May 2026 and launching Bitcoin volatility index futures in June, allowing institutions to bet on or hedge against the severity of price fluctuations, rather than its direction.

Corporate treasuries have pushed this idea the furthest. By late May 2026, Strategy held 843,738 BTC. The company issued $6.7 billion in convertible notes, which are bonds that can be converted into stock if the share price rises, plus $15.5 billion in preferred equity, spread across five different instruments, paying fixed dividends and existing between debt and common stock, to fund its insane BTC purchases.

In just 2025, it raised $25.3 billion, making it the largest equity issuer in the U.S. that year, accounting for about 8% of all issuance, marketing the preferred securities as "digital credit," which forms a complete fixed-income product line whose dividends are ultimately serviced by Bitcoin's balance sheet.

Shareholders effectively gain leveraged Bitcoin exposure through equities; dividend investors obtain double-digit yields supported by coins, with imitators from publicly traded Metaplanet in Tokyo to Semler Scientific replicating Michael Saylor's risk playbook.

Private banks run parallel assembly lines for wealthy clients, packaging structured notes that limit the downside of Bitcoin exposure at the cost of giving up some upside potential, allowing conservative portfolios to hold an asset that would otherwise be too volatile for them.

This brings the opening paradox full circle.

The ETF answers how institutions own Bitcoin, while the products described in this article answer what owning it is for. An asset capitalizing a Caribbean reinsurance company, supporting investment-grade bonds, providing margin for CME derivatives, and servicing preferred equity dividends has long surpassed speculative adoption and entered the functioning mechanisms of finance.