Crypto market-maker Wintermute said the digital asset market has entered a phase of “recycled liquidity,” where capital circulates within the ecosystem rather than flowing in from new sources.
In a Wednesday blog post, the firm argued that liquidity remains the core driver of every crypto cycle, but current momentum has stalled. Despite blockchain adoption continuing to expand, inflows from the market’s three main funding sources stablecoins, exchange-traded funds (ETFs), and digital asset treasuries (DATs) have plateaued in recent months.
Liquidity inflows stagnate across key channels
Wintermute data showed that since early 2024, crypto liquidity saw significant expansion before losing steam. Assets tied to ETFs and DATs grew from $40 billion to $270 billion, while stablecoin issuance nearly doubled to $290 billion.
However, that growth has now flattened, leaving the market operating in what Wintermute called a “self-funded phase.”
“Liquidity hasn’t disappeared,” Wintermute wrote. “It’s simply recycling within the system instead of expanding it.”
The firm said that while trading volumes remain healthy, the lack of fresh capital has caused rallies to fade quickly. Instead, volatility has been driven by liquidation cascades rather than sustained buying pressure a hallmark of what it described as a “player-versus-player” market.
Macro liquidity remains strong — but flows elsewhere
Interestingly, Wintermute noted that the crypto slowdown isn’t due to tight monetary policy, since global liquidity conditions remain broadly supportive.
Aggregate money supply (M2) has stabilized, and several central banks have started easing rates after two years of tightening. But despite that, liquidity is flowing toward safer assets rather than risk markets like crypto.
The firm attributed this trend to elevated short-term yields and the Secured Overnight Financing Rate (SOFR), which has incentivized investors to park capital in U.S. Treasury bills instead of digital assets.
As a result, while the crypto ecosystem remains active, capital rotation is internal, limiting the sector’s growth potential until new liquidity arrives.
Next inflow wave could spark market revival
Wintermute suggested that a revival in any of the three liquidity channels ETFs, stablecoins, or DATs could mark the start of a new crypto growth phase.
For instance, renewed stablecoin minting, new ETF approvals, or a rebound in treasury accumulation might signal that macro liquidity is returning to digital assets. Until that happens, Wintermute expects sideways price action and muted volatility despite progress in blockchain infrastructure.
Institutional accumulation quietly continues
Although Wintermute warned that DAT inflows have slowed, other analysts said large institutions remain active.
A recent Bitwise report found that 48 new Bitcoin treasuries were created within three months, suggesting ongoing corporate interest.
Many firms are accumulating Bitcoin through over-the-counter (OTC) deals rather than public markets a strategy she described as a “quiet form of accumulation” that minimizes volatility and slippage.