Despite persistent discussion around institutional adoption, insufficient liquidity is emerging as the crypto market’s main structural weakness. According to Jason Atkins of Auros, the challenge is not price swings but whether markets can realistically handle large-scale capital without becoming unstable.
Atkins argues that institutional interest exists, but the market lacks the depth required to absorb sizable trades. Major deleveraging events, including sharp market drawdowns, have removed leverage and active participants faster than they can return. As a result, market depth has thinned, making it harder for large players to enter or exit positions efficiently.
Liquidity providers, he explained, respond to trading activity rather than generate it. When volume drops, risk-taking declines, leading to reduced depth. This creates a feedback loop where thin liquidity fuels volatility, prompting even tighter risk controls and further withdrawal from market makers.
For large allocators, liquidity risk outweighs volatility risk. Institutions operate under strict capital preservation rules, where the priority is not maximizing returns, but ensuring positions can be hedged and exited cleanly. In illiquid markets, even modest volatility becomes difficult to manage.
Atkins dismissed the idea that capital is shifting away from crypto into other sectors, describing the slowdown as structural rather than cyclical. Until markets can reliably absorb size, manage risk, and provide consistent liquidity, institutional participation is likely to remain cautious — regardless of long-term interest.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.