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 realize
- The headlines institutions should pay attention to Francisco Rodrigues
- Helium’s deflationary reversal in the chart of the week
Expert Views
The Crypto Liquidity Mirage: Why Aggregate Volume Doesn’t Equal Tradeable Depth
– By Leo Mindyukco-founder and CEO, ML Tech
Crypto seems liquid, until you try to trade in large volumes. Especially during times of market stress and even more so if you want to execute coins outside the top 10-20.
On paper, the numbers are impressive. Billions were traded in daily volume and billions were traded in monthly volume. Tight spreads on Bitcoin and ether (ETH). Dozens of exchanges compete for the flow. This looks like a mature and very efficient market. The start of the year saw about $9 trillion in monthly spot and derivatives volume, then October 2025 saw about $10 trillion in monthly volume (including a lot of activity around the October 10 market bloodbath). Then, in November, derivatives trading volumes fell 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 zoom in further.
At first glance, many crypto exchanges are competing for flows, but in reality, only a small group of exchanges dominate (see chart below). If these experience a decrease in liquidity or connectivity issues preventing volume execution, the entire crypto market is impacted.
Not only are the volumes concentrated on a few exchanges, but they are also heavily concentrated on BTC, ETH, and a few other top cryptocurrencies.
Liquidity appears quite strong 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 chart below), markets that had $103.64 million in visible liquidity suddenly had only $0.17 million available, a collapse of more than 98%. The bid-ask imbalance increased from +0.0566 (large supply, buyers waiting) to -0.2196 (large supply, sellers crushing the market in a ratio of 78:22).
For institutions deploying significant capital, the distinction becomes obvious very quickly. The top of the book can have tight spreads and reasonable depth. Go down a few levels and liquidity diminishes quickly. The impact on the market is not increasing gradually, it is accelerating. What seems like a manageable order can move the price much more 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 spread across multiple sites, each with different participants, latency profiles, API systems (which may fail or experience disruption), and risk models (which may be constrained). Reported volume aggregates activity, but it does not aggregate liquidity in a way that makes it easily accessible for large-scale execution. This is especially evident for small rooms.
This fragmentation creates a false sense of comfort. In calm markets, spreads compress and portfolios appear stable. In times of volatility, liquidity providers rerate or withdraw their securities entirely. They get unfavorable inventory and are unable to reduce risk and withdraw their quotes. Depth disappears more quickly than most models assume. The difference between listed liquidity and sustainable liquidity becomes evident when conditions change.
What matters is not how the book looks at 10 a.m. on a slow day. What matters is how he behaves under stress. Experienced quants know this, but most market participants do not, as they find it difficult to gradually close open positions and then be liquidated during stress events. We saw him in October and several times since.
In execution analysis, slippage does not scale linearly with order size; it composes. Once an order exceeds a certain depth threshold, its impact increases disproportionately. Under volatile conditions, this threshold decreases. As a result, even modest transactions can cause prices to move more than historical norms suggest.
For institutional distributors, this is not a technical nuance. It’s a question of risk management. Liquidity risk is not just about entering a position, it is also about exiting when liquidity is scarce and correlations increase. Want to run a few million smaller parts? Good luck! Do you want to exit losing positions in less liquid coins when the market is busy, like during the October crash? This can become catastrophic!
As digital asset markets continue to mature, the conversation must move beyond key volume indicators and high-level liquidity snapshots during quiet markets. The true measure of market quality is the resilience and consistency with which liquidity resists pressure.
In crypto, liquidity is not defined by what is visible under normal, stable conditions. It is defined by what remains when the market is tested. This is when capacity assumptions collapse and risk management takes center stage.
Headlines of the week
Wall Street giants continued to move deeper into the cryptocurrency space over the past week, while new data shed light on the scale of the space in Russia and its potential size in Asia. Major market players Binance and Strategy have meanwhile doubled their massive 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, in a deal that saw it invest an undisclosed amount in UNI. Likewise, Apollo Global Management (APO) hit a cooperation agreement with Morpho.
- Russia’s daily crypto turnover exceeds $650 million, says Finance Ministry: The country’s government and central bank are pushing for legislation to regulate cryptocurrency activities, while the Moscow Stock Exchange seeks to strengthen its presence in the market.
- Binance converts its $1 billion safety net into 15,000 BTC: Binance, the leading cryptocurrency exchange, has finished converting the Secure Asset Fund for Users (SAFU) to Bitcoin, turning approximately $1 billion into 15,000 BTC.
- BlackRock executive says 1% crypto allocation in Asia could unlock $2 trillion in new flows: Nicholas Peach, head of APAC iShares at BlackRock, said even a modest portfolio allocation to cryptocurrencies in Asia could unlock $2 trillion in new flows.
- Strategy claims it can survive even if bitcoin drops to $8,000 and will “equalize” the debt: Strategy, the largest Bitcoin treasury company with 714,644 bitcoins on its balance sheet, said it can withstand a decline in the price of bitcoin to $8,000 while still covering its debt of around $6 billion.
Chart of the week
The deflationary reversal of helium
Helium has surged 37.5% since the start of the month, decoupling 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, neutralizing long-standing selling pressure. This transition is fueled by an increase in network demand, with daily data credit consumptions increasing from $30,000 to over $50,000 since the start of the year, indicating that token destruction by utilities is now outpacing new issuance.
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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 its owners and affiliates.
