Welcome to our institutional newsletter, Crypto Long & Short. This week:
- Leo Mindyuk on how enforceable liquidity at scale is more fragmented and fragile than most institutions assume
- Top headlines institutions should be aware of by Francisco Rodrigues
- Helium’s Deflationary Flip in the Chart of the Week
-Alexandra Levis
Expert insight
Crypto’s liquidity mirage: why headline volume does not equal tradable depth
– By Leo Mindyuk, Co-Founder and CEO, ML Tech
Crypto looks fluid until you try to trade large volumes. Especially during periods of market stress and even more so if you want to execute on coins outside the top 10-20.
On paper, the numbers are impressive. Billions traded in daily volume and trillions traded in monthly volume. Tight spreads on bitcoin and ether (ETH). Dozens of exchanges compete for flow. It looks like a mature, highly efficient market. The beginning of the year saw about $9 trillion in monthly spot and derivatives volumes, and October 2025 saw about $10 trillion in monthly volume (including a lot of activity around the October 10th market carnage). Then in November, derivatives trading volume fell 26% to $5.61 trillion, registering the lowest monthly activity since June, followed by even bigger declines in December and January, according to CoinDesk Data. Those are still some very impressive numbers, but let’s zoom in further.
At first glance, there are many crypto exchanges competing for flow, but in reality only a small group of exchanges dominates (see graph below). If these have liquidity dilution or connectivity issues preventing volume execution, the entire crypto market is affected.
It is not only that the volumes are concentrated in a few exchanges, they are also highly concentrated in BTC, ETH and a few other top coins.
Liquidity seems quite solid with a number of institutional market makers active in the space. However, visible liquidity is not the same as executable liquidity. According to Amberdata (see graph below), markets showing $103.64 million in visible liquidity suddenly had only $0.17 million available, a 98%+ collapse. The bid-ask imbalance turned from +0.0566 (bid-heavy, buyers wait) to -0.2196 (ask-heavy, sellers overwhelmed the market in a ratio of 78:22).
For institutions using meaningful capital, the difference becomes obvious very quickly. The top of the book might show tight spreads and reasonable depth. Go down a few levels and liquidity thins out quickly. Market impact does not increase gradually, it accelerates. What looks like a manageable order can move price far more than expected once it interacts with real depth.
The structural reason is simple. Crypto liquidity is fragmented. There is no single consolidated market. The depth is spread across venues, each with different participants, latency profiles, API systems (that can break or have disruptions), and risk models (that can come under stress). Reported volume aggregates activity, but it does not aggregate liquidity in a way that makes it readily available for large executions. This is especially evident for smaller coins.
That fragmentation creates a false sense of comfort. In calm markets, spreads compress and books look stable. During volatility, liquidity providers rewrite or withdraw entirely. They get unfavorable holdings and are unable to de-risk and pull out their offers. The depth disappears faster than most models assume. The difference between quoted liquidity and permanent liquidity becomes apparent when conditions change.
What matters is not how the book looks at 10:00 on a quiet day. What matters is how it behaves under stress. Experienced quants know this, but most of the market participants do not as they struggle to close open positions gradually and then get liquidated during the stress events. We saw that in October and a few times since.
In execution analysis, slippage does not scale linearly with order size; it composes. When an order crosses a certain depth threshold, the impact increases disproportionately. Under volatile conditions, this threshold shrinks. Suddenly, even modest trades can move prices more than historical norms suggest.
For institutional allocators, this is not a technical nuance. It’s a risk management issue. Liquidity risk isn’t just about entering a position, it’s about exiting when liquidity is tight and correlations rise. Want to make a few million of some smaller coins? Good luck! Do you want to exit losing positions in less liquid coins when the market is busy like during the October crash? It could be disastrous!
As digital asset markets continue to mature, the conversation must move beyond headline volume metrics and top-level liquidity snapshots during quiet markets. The real measure of market quality is resilience and how consistently liquidity holds up under pressure.
In crypto, liquidity is not defined by what is visible under normal stable conditions. It is defined by what is left when the market is tested. This is when capacity assumptions break down and risk management takes center stage.
This week’s headlines
– Francisco Rodrigues
Wall Street giants have continued to move deeper into the cryptocurrency space over the past week, while new data has shed light on how big the space is in Russia and how big it could get in Asia. Major market participants Binance and Strategy, meanwhile, have doubled their massive BTC reserves.
- Wall Street giants enter 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. In the same way, Apollo Global Management (APO) entered into a cooperation agreement with Morpho.
- Russia’s Daily Crypto Revenue Exceeds $650 Million, Finance Ministry Says. 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 converts its $1 billion safety net into 15,000 BTC: Leading cryptocurrency exchange Binance has finished converting the Secure Asset Fund for Users (SAFU) to bitcoin, turning about $1 billion into 15,000 BTC.
- BlackRock exec says 1% crypto allocation in Asia could unlock $2 trillion in new flows: BlackRock’s head of APAC iShares, Nicholas Peach, has said that even a modest portfolio allocation to crypto in Asia could unlock $2 trillion in new flows.
- Strategy says it can survive even if bitcoin falls to $8,000 and will “offset” debt: Strategy, the largest bitcoin treasury firm with 714,644 bitcoin 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 flip
Helium is up 37.5% month-to-date, and is decoupled from the broader market as its fundamentals shift toward a deflationary pattern. Since the start of 2026, the protocol’s net emissions have turned negative, effectively neutralizing long-term selling pressure. This transition is fueled by a jump in network demand, with daily data credit burns rising from $30,000 to over $50,000 since the beginning of the year, signaling that utility-driven token destruction is now outpacing new issuance.
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Note: The views expressed in this column are those of the author and do not necessarily reflect the views of CoinDesk, Inc., CoinDesk Indices, or its owners and affiliates.
