Crypto Market Faces Liquidity Crisis, Not Volatility Problem, Says Auros Executive
Liquidity Emerges as the Hidden Challenge Hampering Institutional Crypto Adoption
In a stark assessment that has reverberated throughout the cryptocurrency industry, Auros Chief Commercial Officer Jason Atkins has identified market liquidity—not volatility—as the primary obstacle preventing wider institutional adoption of digital assets. Speaking ahead of the prestigious Consensus event in Hong Kong, Atkins challenged the conventional narrative that price fluctuations are deterring major financial players, instead pointing to a more fundamental structural issue within cryptocurrency markets.
“It’s one thing to say, ‘we’ve convinced them to come now,'” Atkins remarked during his address. “It’s another to ask, ‘Do you have enough room for everyone?'” His comments come at a critical juncture for the cryptocurrency sector, which has witnessed growing institutional interest throughout 2025 despite persistent market challenges. Industry analysts have subsequently validated Atkins’ concerns, noting that even as Wall Street’s curiosity about digital assets intensifies, the market’s limited depth remains problematic for large players who cannot execute substantial positions without triggering significant price movements.
Atkins further elaborated on this predicament in a published statement following the event, arguing that “markets cannot conclude that institutional investors want to participate in their activities if the factors required to make this possible are absent.” This observation cuts to the heart of a paradoxical situation: institutional interest is rising, yet the infrastructure necessary to accommodate this interest—particularly market depth and liquidity—lags behind demand. The fundamental question, according to Atkins, isn’t whether institutions are interested in cryptocurrency markets, but whether these markets possess the capacity to absorb institutional-scale capital flows without destabilizing price action.
Market Dynamics Creating a Negative Feedback Loop
The cryptocurrency industry’s liquidity challenges stem from a complex interplay of market forces that have created a problematic cycle, according to Atkins. He attributed the current state to “fading market interest” compounded by substantial sell-offs—such as the October 10 market crash—that have outpaced the speed at which traders and leverage can return to the ecosystem. This dynamic has created what industry executives describe as a shift among liquidity providers from “demand generation to demand fulfillment,” a technical distinction with profound implications.
This transition reflects a fundamental change in market maker behavior. As trading activity decreases, market makers naturally reduce their risk exposure, which paradoxically increases market volatility. This heightened volatility then triggers more conservative risk protocols among remaining market participants, further reducing market liquidity in a self-reinforcing negative cycle. Atkins emphasized that institutions cannot effectively serve as market stabilizers while the broader ecosystem remains weak, highlighting that “the market lacks a natural safety net in difficult times.”
The resulting pattern has proven particularly troublesome for cryptocurrency markets: volatility, caution, and illiquidity reinforce one another, suppressing overall market performance despite strong long-term investment fundamentals. Atkins made the critical distinction that volatility alone isn’t what deters major investors—rather, it’s the combination of volatility and thin markets that creates an untenable situation for institutional capital. “It is difficult to handle volatility in thin markets,” he noted, explaining that protecting investments becomes challenging, while exiting positions becomes even more problematic in such conditions.
Institutional Constraints: Safety First in Cryptocurrency Investment
The liquidity challenges identified by Atkins create disproportionately greater obstacles for institutions compared to individual traders, reflecting fundamental differences in investment mandates and risk management requirements. Major investors operate under strict capital preservation guidelines that severely limit their tolerance for liquidity risk, regardless of potential returns. This reality creates a structural barrier to institutional involvement that transcends mere price volatility.
“At that level of wealth, or if you are a huge institution,” Atkins explained, “it’s not just about getting the highest returns. It’s about getting the best returns while keeping your capital safe.” This safety-first approach represents a core constraint for institutional investors considering cryptocurrency allocations. While individual traders might accept the risk of limited liquidity in exchange for potentially outsized returns, institutional investors must prioritize their ability to enter and exit positions without significant market impact—a capability the current cryptocurrency market structure cannot consistently provide.
Atkins also took the opportunity to dispute a popular narrative regarding capital flows between emerging technology sectors. He rejected the notion that investment capital is migrating from cryptocurrency to artificial intelligence applications, arguing these two technological domains occupy different developmental stages and attract distinct investment theses. While artificial intelligence has existed as a field of study and commercial application for decades, Atkins noted that recent heightened interest in AI represents an unprecedented surge in attention rather than a reallocation of capital previously designated for cryptocurrency investments.
The Path Forward: Building Institutional-Grade Market Infrastructure
The liquidity challenges highlighted by Atkins point toward a clear developmental priority for cryptocurrency markets: building robust, institutional-grade market infrastructure capable of handling substantial capital flows without excessive price impact. This evolution will require coordinated efforts across multiple facets of the ecosystem, from exchange operations to market making approaches and regulatory frameworks.
Improving market depth represents a chicken-and-egg problem that has long plagued emerging asset classes. Greater institutional participation would naturally enhance liquidity, yet institutions remain hesitant to participate fully until liquidity improves. Breaking this cycle will likely require dedicated liquidity provision programs, enhanced cross-venue arbitrage mechanisms, and potentially new market structures designed specifically for institutional-scale trading. Some market participants have proposed solutions involving specialized institutional pools, off-chain settlement networks, and improved prime brokerage services to address these concerns.
Regulatory clarity will also play a crucial role in addressing liquidity challenges, as regulatory uncertainty continues to constrain many potential market makers and institutional participants. The development of standardized trading practices, improved risk management tools, and more sophisticated derivatives markets could collectively help bridge the gap between institutional requirements and current market capabilities. While these developments will take time to implement fully, Atkins’ comments have highlighted their urgency and importance to the sector’s long-term growth trajectory and institutional adoption prospects.
As cryptocurrency markets continue maturing in 2025, addressing the fundamental liquidity challenges identified by Atkins will likely prove more consequential than managing price volatility alone. The industry’s ability to develop deeper, more resilient markets will ultimately determine whether growing institutional interest translates into substantial capital commitments—and whether cryptocurrency can fulfill its potential as a mainstream asset class capable of accommodating the world’s largest investors without sacrificing the market stability they require.
