Liquidity in crypto is the pulse of every price action in the digital assets world. As much as technological adoption and innovation define long term narratives, money is what really defines short term momentum.
Wintermute claims in the most recent report that the liquidity that previously drove the growth of crypto has waned, and now the market is in the stage of internal capital rotation and not new growth.
In the last 18 months, the overall liquidity going into crypto via stablecoins, ETFs, and Digital Asset Treasuries (DATs) surged to approximately $560 billion up from approximately 180 billion. Nevertheless, the impressive growth has begun to level off since mid-2025, which indicates that the inflow of new external capital has slowed down drastically.
How Liquidity Shapes the Crypto Market
Liquidity is not only market depth, but also the availability of capital itself. As the money supply in the world increases or interest rates decrease, excess liquidity will naturally seek other riskier assets such as cryptocurrencies.
Traditionally, the key beneficiaries of such liquidity waves have been Bitcoin and Ethereum, as they were in the 2021 bull market.
According to data provided by Wintermute, ETFs and DATs create more liquidity, and as a result, the price of digital assets is likely to increase accordingly. On the other hand, market rallies run out of steam when the inflows are decreasing.
The liquidity composition chart makes this close relationship evident: the total market capitalization closely followed the aggregate of the supply of stablecoins, ETF assets under management (AUM), and DAT net asset value (NAV).
Three Core Channels of Capital Entry
Liquidity in the ecosystem is introduced into the digital assets in three primary pipelines:
- Stablecoins: These serve as the on-chain equivalent of fiat, as well as the underlying collateral to trade and leverage.
- ETFs: The gateway connecting old investors and institutions to regulated access to Bitcoin and Ethereum.
- Digital Asset Treasuries (DATs): On-chain funds and yield-generating products which tokenize real-world assets and bridge them to DeFi liquidity.
As Wintermute adds, all these three elements combine to form the basis of the crypto liquidity structure, but they have all been exhibiting stagnation recently.
Expansion Has Stalled Within Liquidity Channels
Between early 2024 and November 2025, stablecoins grew twofold to about 290 billion and ETFs and DATs increased by a factor of four to 270 billion. Nevertheless, this growth has now stagnated.
Wintermute shows that the three month average change in ETF AUM and DAT NAV has become flat since September 2025, indicating that it has stopped to external inflows. Simply put, liquidity is not exiting crypto, it is just circulating in the system, shifting between Bitcoin, altcoins, and DeFi protocols as opposed to new liquidity coming into the system.
Why Fresh Money Has Stopped Flowing
The deceleration is not always caused by a liquidity crunch in the world. As a matter of fact, M2 money supply is stable and central banks are slowly unleashing monetary conditions. But high short-term yields and an appealing risk-free rate environment have ensured that institutional funds remain trapped in Treasury bills and money market funds instead of heading into digital assets.
The analysts at Wintermute note that the SOFR rate that is held at a higher level has caused a temporary headwind to speculative risk-taking. Because of this, the crypto markets are confronting a sort of capital inertia wherein current liquidity is circulated within the ecosystem without growing it.
This internal rotation is the reason the new rallies have been brief and shallow. Money is moving between large holdings such as Bitcoin and Ethereum and smaller altcoin markets, which results in unstable, player-versus-player (PVP) markets.
What Could Reignite Momentum
Any liquidity stimulation in any of the three primary channels would rekindle a far-reaching market rally. New issuances of stablecoins, new inflows into ETFs, or new creation of DAT would be a good indication that external capital is back into the ecosystem.
Until then, crypto is in what Wintermute terms a self-funded phase, a phase of internal recycling of funds, instead of external growth.
Macro conditions are also encouraging future growth, given that global quantitative tightening (QT) is coming to an end, and monetary easing is returning. In case risk appetite comes back and institutional investors start shifting capital, the industry may become a significant liquidity source again.