Wintermute, a crypto market-maker, has highlighted that the ongoing cycle in the digital asset market is primarily influenced by 'recycled liquidity,' as the influx from its main funding sources has diminished. In a recent blog post, Wintermute emphasized that liquidity is crucial for every crypto cycle. Despite ongoing blockchain adoption, the influx of new capital has slowed down. The firm identified stablecoins, exchange-traded funds (ETFs), and digital asset treasuries (DATs) as the key liquidity sources, noting that inflows in these areas have plateaued. Although the industry saw growth in these sectors since 2024, the momentum has waned, leading to a 'self-funded phase.' Wintermute attributed this slowdown not to tighter monetary conditions but to where liquidity is directed, with high short-term rates pushing investors towards safer US Treasury bills. This has resulted in a 'player-versus-player' market, characterized by short-lived rallies and volatility driven by liquidation rather than sustained buying. A revival in liquidity channels could signal a return of macro liquidity to crypto. Read more AI-generated news on: https://app.chaingpt.org/news

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