Welcome to our institutional newsletter, Crypto Long & Short. This week:
- Leo Mindyuk on how executable liquidity at scale is more fragmented and fragile than most institutions assume
- Top headlines that institutions should pay attention to by Francisco Rodrigues
- Helium’s deflationary turn on the chart of the week
-Alexandra Levis
Expert Perspectives
The Crypto Liquidity Mirage: Why Overall Volume Doesn’t Equate to Tradable Depth
– By Leo Mindyuk, Co-Founder and CEO of ML Tech
Cryptocurrencies seem liquid until you try to trade large volumes. Especially during periods of market stress and even more so if you want to run coins outside the top 10-20.
On paper, the numbers are impressive. Billions were traded in daily volume and trillions in monthly volume. Adjusted bitcoin spreads and ether (ETH). Dozens of exchanges compete for the flow. It seems like a mature and highly efficient market. Around $9 trillion in monthly spot and derivatives volumes were recorded at the start of the year, then around $10 trillion in monthly volume was recorded in October 2025 (including a lot of activity around the October 10 market bloodbath). Then in November, derivatives trading volumes declined 26% to $5.61 trillion, recording the lowest monthly activity since June, followed by even larger declines in December and January, according to CoinDesk Data. These are still very impressive numbers, but let’s get closer.
At first glance, there are many crypto exchanges competing for the flow, but in reality only a small group of exchanges dominate (see chart below). If they have reduced liquidity or connectivity issues that prevent volume execution, the entire crypto market is affected.
It is not only that the volumes are concentrated on a few exchanges, but they are also highly concentrated on BTC, ETH, and a couple of other major coins.
Liquidity appears quite strong with several institutional market makers active in the space. However, visible liquidity is not the same as executable liquidity. According to Amberdata (see chart below), markets that were showing $103.64 million in visible liquidity suddenly had just $0.17 million available, a collapse of more than 98%. The imbalance between supply and demand went from +0.0566 (many offers, buyers waiting) to -0.2196 (many demands, sellers overwhelming the market in a ratio of 78:22).
For institutions that deploy significant capital, the distinction becomes obvious very quickly. The top of the book could show tight spreads and reasonable depth. If it goes down a few levels, liquidity will reduce quickly. The impact on the market does not increase gradually, but rather accelerates. What seems like a manageable order can move the price much further than expected once it interacts with real depth.
The structural reason is simple. Crypto liquidity is fragmented. There is no consolidated single market. The depth is distributed across locations, each with different participants, latency profiles, API systems (which can fail or have outages), and risk models (which can come under stress). The reported volume adds activity, but does not add liquidity in a way that makes it easily accessible for large executions. This is especially evident in the case of smaller coins.
That fragmentation creates a false sense of comfort. In calm markets, spreads compress and books appear stable. During periods of volatility, liquidity providers modify their prices or withdraw them entirely. They get unfavorable inventory and can’t eliminate risk and get their quotes. Depth disappears faster than most models assume. The difference between quoted liquidity and durable liquidity becomes clear when conditions change.
What matters is not what the book looks like at 10:00 am on a calm day. What matters is how you behave during stress. Experienced quants know this, but most market participants do not, as they struggle to close open positions gradually and then be liquidated during stress events. We saw this in October and a couple of times since then.
In execution analysis, slippage does not scale linearly with order size; is composed. Once an order crosses a certain depth threshold, the impact increases disproportionately. In volatile conditions, that threshold is lowered. Suddenly, even modest transactions can influence prices more than historical norms would suggest.
For institutional allocators, this is not a technical nuance. It is a question of risk management. Liquidity risk is not only about entering a position, but also about exiting when liquidity is tight and correlations increase. Do you want to run a couple million smaller coins? Good luck! Do you want to exit losing positions in less liquid currencies when the market is busy, such as during the October crash? It can be catastrophic!
As digital asset markets continue to mature, the conversation needs to move beyond headline volume metrics and high-level liquidity snapshots during calm markets. The true measure of market quality is the resilience and consistency with which liquidity remains under pressure.
In crypto, liquidity is not defined by what is visible during normal stable conditions. It is defined by what is left when the market is tested. This is when capacity assumptions are broken and risk management takes center stage.
Headlines of the week
– francisco rodrigues
Wall Street giants have continued to push deeper into the cryptocurrency space over the past week, while new data has shed light on just how big the space is in Russia and how big it could become in Asia. Meanwhile, major market participants Binance and Strategy have doubled their huge BTC reserves.
- Wall Street giants enter the DeFi market with token investments: BlackRock has made its tokenized US Treasury fund BUIDL tradable on decentralized exchange Uniswap, as part of a deal that saw it invest an undisclosed amount in UNI. Similarly, Apollo Global Management (APO) reached a cooperation agreement with Morpho.
- Daily cryptocurrency turnover in Russia exceeds $650 million, according to the Ministry of Finance. The country’s government and central bank are pushing for legislation to regulate cryptocurrency activities, while the Moscow Stock Exchange seeks to deepen its presence in the market.
- Binance turns its billion-dollar security network into 15,000 BTC: Leading cryptocurrency exchange Binance has finished converting the Secure Asset Fund for Users (SAFU) into bitcoin, converting around $1 billion into 15,000 BTC.
- BlackRock Exec Says 1% Crypto Allocation in Asia Could Unlock $2 Trillion in New Flows: BlackRock’s iShares APAC head Nicholas Peach has said that even a modest portfolio allocation to cryptocurrencies in Asia could unlock $2 trillion in new flows.
- Strategy says it can survive even if bitcoin falls to $8,000 and will ‘even out’ debt: Strategy, the largest bitcoin treasury firm with 714,644 bitcoins on its balance sheet, said it can withstand a bitcoin price drop to $8,000 and still cover its roughly $6 billion in debt.
Chart of the week
Helium’s deflationary turn
Helium has risen 37.5% so far this month, decoupling from the broader market as its fundamentals shift toward a deflationary model. Since early 2026, the protocol’s net emissions have turned negative, effectively neutralizing long-standing selling pressure. This transition is driven by an increase in network demand, with daily data credit consumption rising from $30,000 to over $50,000 since the beginning of the year, indicating that utility-driven token destruction is now outpacing new issuances.
Hear. Read. Look. Engage.
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Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc., CoinDesk Indices or their owners and affiliates.
