Opinion by: Harpal Sandhu, CEO of Integral
Despite the recent plummet in Bitcoin (BTC) and other major cryptocurrencies, 2025 was a high watermark year for crypto as new price highs were hit for major coins.
The US administration’s regulatory push provided a seal of approval, signalling that crypto was on the path to maturity. Banks, which have been cautious with crypto over the past five years, rapidly changed their tune.
Beneath all this progress lie deeper structural issues in the crypto market that more US regulation won’t solve.
The October 2025 market correction clearly revealed liquidity issues which are still prevalent today. While they are not causing the current crash, illiquidity hampers market stability.
A shortage of crypto credit and prime brokerage are directly contributing to crypto’s liquidity droughts. If the industry does not create more crypto credit, an artificial ceiling will be placed on cryptocurrencies.
Market shock
The Oct. 10, 2025, correction itself was not unusual; sudden sharp volatility continues to be a staple of crypto. It’s for this reason some market participants, like hedge funds, find it attractive. What was more revealing was how quickly liquidity evaporated and how slowly it has — or in this case hasn’t — returned. Geopolitical and policy decisions have caused spikes in volatility across traditional financial markets, including equities, bonds and foreign exchange (FX).
Yet liquidity in these markets recovered rapidly, allowing traders to easily access these markets. FX traders have highlighted how advancements in trading technology have made those markets so efficient that spreads have disappeared. It leaves very little for those firms that benefit when the price between buy and sell orders widens.
Structural, not cyclical, issues
The same cannot be said for crypto. Not only did liquidity dry up in the aftermath of Oct. 10, but it remained thin months later as sellers struggled to find buyers. The same is still the case today, as the value of major coins plummeted. The fall in value is due to a loss of conviction in cryptocurrencies as an asset, but poor liquidity is being fueled by structural issues.
One of the principal constraints is a shortage of credit. In crypto, trades are mostly pre-funded, and the use of leverage for market making is small. When volatility spikes, capital is quickly withdrawn, and spreads widen dramatically. The absence of sustainable, transparent credit mechanisms leaves the market brittle at precisely the moments when liquidity is most critical. This isn’t necessarily enough to stop a decline in prices, but it can shore up market conditions.
To overcome these structural issues, the industry needs to look at what works well in traditional finance and adopt similar mechanisms that play into crypto’s decentralized finance strengths. Better access to credit is the essential step.
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In FX, for example, market makers can become risk takers temporarily, supported by credit lines from prime brokers that allow them to continue quoting prices to liquidity takers even during periods of high stress. In other words, credit fuels market activity. Crypto lacks this support due to the absence of adequate credit.
More crypto prime brokerage is essential
Regulation constrains how investment banks engage in cryptocurrency markets. The capacity of banks to hold and finance crypto exposures is limited by Basel III and the prudential rules around crypto assets, which impose high capital requirements.
Even if a more favorable US administration loosens these rules, conditions will remain challenging, and the likelihood of banks entering crypto prime brokerage at scale is low due to the volatile nature of crypto.
The crypto market needs a resilient and broad layer of crypto prime brokerage with more credit provision if liquidity conditions are to improve. The liquidity shortfall is not a deep mystery. In many cases, there are buyers and sellers out there, but they exist in fragmented pools between isolated markets.
More crypto credit would substantially improve liquidity, as market makers and investors do not need to wholly pre-fund trades. Capital can be used more dynamically, instead of being locked up, which is a major issue today. This would enable companies to deploy more of their capital, connecting with more buyers and sellers, which in turn allows liquidity takers to place more trades.
At the same time, prime brokers enable netting between counterparties, which frees up capital for more trading. Crucially, broader provision of credit allows more institutional firms to directly participate in spot cryptocurrency markets, bringing much-needed participants to deepen trading and liquidity. Credit combined with trading and settlement infrastructure would quickly bring more firms together with credit and shared infrastructure for margin exchange and settlement, creating a market more attractive to liquidity providers.
The crypto market structure must evolve if it is to keep momentum in 2026. Regulatory developments or crypto-friendly administrations will not be enough to power the asset class forward amid dramatic sell-offs in major cryptocurrencies. If more credit is available, the crypto market will have deeper trading activity and more resilient liquidity. Failure to build this infrastructure will limit crypto to being an asset class of booms and busts.
Opinion by: Harpal Sandhu, CEO of Integral.
This opinion article presents the contributor’s expert view and it may not reflect the views of Cointelegraph.com. This content has undergone editorial review to ensure clarity and relevance, Cointelegraph remains committed to transparent reporting and upholding the highest standards of journalism. Readers are encouraged to conduct their own research before taking any actions related to the company.
