Opinion: Arthur Azizov, founder and investor in B2 Ventures
Despite its decentralized nature and great promises, the cryptocurrency is still a currency. Like all currencies, it cannot escape the facts of the market dynamics today.
With the development of the encryption market, it begins to reverse the life cycle of traditional financial tools. The illusion of liquidity is one of the most urgent and surprising issues, less tackled than issues that stem from the development of the market.
It was the global cryptocurrency market value At 2.49 trillion dollars in 2024, it is expected to reach more than $ 5.73 trillion by 2033, as it grows at an annual growth rate of 9.7 % over the next decade.
Under this growth, however, lies fragility. Like FX and Bond markets, Crypto now challenges fake liquidity: requests that appear strong during calm periods quickly during the storm.
The illusion of liquidity
With more 7.5 trillion dollars In the daily trading volume, the foreign exchange market is seen historically as the most liquid. However, even this market now shows signs of fragility.
Some financial institutions and merchants fear the illusion of the depth of the market, and the regular slipping even on the most liquid FX pairs, such as EUR/USD, more concrete. There is no single bank or market maker ready to counter the risk of flying assets during the sales process-what is called warehouse risks after 2008.
In 2018, Morgan Stanley male A deep shift in where there are liquidity risks. After the financial crisis, capital requirements have paid banking to provide liquidity. The risks did not disappear. They have just gone to asset managers, traded investment funds and algorithm systems. There was a breakthrough of negative boxes and vehicles circulating in the exchange per day.
In 2007, money similar to the index detained Only 4 % of MSCI World Free Free. By 2018, this number has doubled three times to 12 %, with concentrations of up to 25 % in specific names. This position shows a structural mismatch – liquid coated containing non -liquid origins.
In circulating investment funds and negative funds promised the ease of entry and exit, but the assets they hold, in particular, can not meet bond companies in particular expectations when the markets turned into fluctuation. During sharp price fluctuations, traded investment funds are often sold more intensively than basic assets. Market makers demanded wider differences or refused to enter, unwilling to keep the assets through disturbances.
This phenomenon, which was first noticed in traditional financing, is now playing with familiarity in encryption. Liquidity may only look strong on paper. Onchain’s activity, the size of the distinctive symbol and arrangement books on central exchanges, indicates the presence of a healthy market. But when the depth disappears, the depth disappears.
The illusion of liquidity appears in Crypto recently to light
They are liquidity in encryption is not a new phenomenon. During the encryption of 2022 RecessionThe main symbols have seen a large sliding and expanding, even on top stock exchanges.
The latest accident of the om Mantra’s symbol He is Another reminder – when feelings change, bids fade, and price support evaporates. What appears at the beginning as a deep market in calm conditions can immediately collapse under pressure.
This happens mainly because the encryption infrastructure is still very broken. Unlike stocks or foreign currency markets, encryption liquidity is widespread through many exchanges, each of which has its own requests and market makers.
recently: Asia bears the liquidity of encryption, but the US Treasury will open the institutional funds
This turned more clearly for level 2 symbols – those outside the highest roofs on the market. These assets are listed through the stock exchanges without uniform pricing or liquidity support, relying on market makers with different states. Therefore, liquidity is found, but without depth or meaningful cohesion.
The problem is exacerbated by opportunistic actors, market makers and symbolic projects, who create an illusion of activity without contributing to real liquidity. December, washing trading and inflated sizes commonEspecially on small exchanges.
Some projects even stimulate the depth of the artificial market to attract menus or look more legitimate. However, when it strikes fluctuations, these players decline immediately, leaving retailers from the soles of the feet with the price collapse. Liquidity is not only fragile, it is simply fake.
Solve the liquidity problem
Integration is required at the basic protocol level to deal with liquidity fragmentation in encryption. This means including the dam and direction of Crosschain directly in the basic infrastructure of Blockchain.
This approach, which was now adopted actively by the chosen Layer-1 protocols, treats the movement of assets not a later idea but as a basic design principle. This mechanism helps to unify liquidity pools, reduce the fragmentation of the market, and ensure smooth capital flow through the market.
Moreover, the basic infrastructure has come a long way. The implementation speeds that took 200 mm are now decreased to 10 or 20. The cloud ecosystems of Amazon and Google, which have P2P messages between groups, can be fully processed in the network.
This performance layer is no longer the bottleneck – it’s a launch platform. It enables market makers and commercial robots to work smoothly, especially since 70 % to 90 % of Stablecoin transactions, a major slice of the encryption market, now Come From automatic trading.
Better than plumbing alone, however, is not enough. These results should be paired with smart interconnection at the protocol level and guidance of uniform liquidity. Otherwise, we will continue to build high -speed systems on the segmented ground. However, the foundation already exists and finally strong enough to support something bigger.
Opinion: Arthur Azizov, founder and investor in B2 Ventures.
This article is intended for general information purposes and does not aim to be and should not be considered legal or investment advice. The opinions, ideas and opinions expressed here are alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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