Crypto markets may seem stable, but experts say liquidity problems could cause sudden price crashes.
- Crypto markets show signs of hidden risks during times of stress.
- Liquidity is often exaggerated by trading practices and system design.
- Fixing crypto liquidity requires base-level integration and better routing.
Why the crypto market looks deep but isn’t
The cryptocurrency market is growing fast, valued at $2.49 trillion in 2024. It may reach $5.73 trillion by 2033. But experts warn this growth covers up some serious problems. One key issue is “fake liquidity.” That means the market looks ready for action, but in tough times there aren’t enough real buyers and sellers.
This pattern mirrors problems seen in other financial markets. Before the 2008 crisis, banks offered more market support. After the crisis, they pulled back. Today, market makers and passive funds try to fill the gap. But that support disappears fast when things turn bad.
Crypto’s structure makes this worse
Crypto trading isn’t centralized. Coins are spread across many platforms. Each one has separate buyers, sellers, and prices. This creates fragmentation. For smaller tokens, it’s even worse. They rely on market makers who only stay active in calm markets.
In many cases, these tokens show high volume only because of wash trading and spoofing. These tricks make a coin look popular, but the activity isn’t real. When prices drop, this artificial support vanishes. Regular investors are then stuck in a falling market.
Real solutions are in progress
Experts say the fix starts with building better systems. Some blockchains are now adding liquidity tools into their base code. This helps different coins and markets work better together. When done right, coins can move quickly and safely between platforms, improving overall liquidity.
Today’s trading speed is much faster than before. Thanks to cloud services like Google and Amazon, trade delays have dropped from 200 milliseconds to just 10 or 20. Automated trading bots now handle most stablecoin trades. But this faster tech needs to be paired with smarter market design.
The core idea is to make crypto markets more connected and less split up. This would help build a safer and stronger system for all users. Until then, the risk of sudden and deep price crashes remains high.
Source: cointelegraph.com
