A new report on the fragmentation and liquidity of the cryptography market has highlighted the growing complexity of the negotiation of digital assets, with liquidity thinning on several sites and regulatory uncertainty shaping institutional participation. The study, entitled Crypto OTC Trading Report 2024, examines the structure of the evolving market, trading mechanisms and the regulatory landscape in cryptographic space.
The report notes that the crypto is the most fragmented asset class in the history of electronic exchanges, with more than 700 negotiation rooms in the world in November 2024. Unlike traditional markets, where liquidity is concentrated in some major exchanges, cryptographic liquidity is dispersed on centralized exchanges (CEXS), decentralized exchanges (Dexs) (OTC) and business platforms.
“The ineffectiveness in the discovery of prices, the increase in transaction costs and the challenges of liquidity”
“This extreme fragmentation leads to ineffectiveness in the discovery of prices, the increase in transaction costs and liquidity challenges for institutional traders,” said the report. He notes that traders must navigate in several sites, often using intelligent control routers (SOR) and liquidity aggregation tools to secure optimal execution.
The division between the markets focused on orders and focused on quotes still complicates trade. Markets focused on orders, such as those using central limit command notebooks (CLOS), are counting on public command books where participants submit offers and offers. On the other hand, the markets focused on quotes, including over -the -counter offices and electronic communication networks (ECNS), depend on suppliers of liquidity which define library differences.
The report identifies liquidity suppliers (LPS) as key players in cryptographic trading, operating in the same way as traditional market manufacturers. However, the crypto LPs face additional challenges due to the volatility of prices and fragmented liquidity pools. “Market manufacturers must carefully balance Bid’s Spreads, as fine liquidity can cause a significant shift in prices,” he said.
Settlement after trade also remains a challenge on cryptographic markets. Unlike traditional finances, where compensation houses manage counterpart risks, cryptographic transactions are based on chain and out -of -chain settlement mechanisms. While transactions on the exchange benefit from internal compensation, over -the -counter transactions often adjust via direct portfolio transfers, increasing the risk of compensation.
The report examines the role of regulations in the formation of market fragmentation, with jurisdictions adopting different approaches to the surveillance of cryptography. Singapore, Switzerland and the United Arab Emirates as the most user -friendly regulatory environments, while legal uncertainty remains the greatest obstacle to institutional adoption.
“Market players are increasingly looking for regulatory clarity, because the risks of compliance dissuade major financial institutions from fully committing to cryptographic markets,” notes the report. Despite this, 92% of the companies questioned plan to obtain additional cryptography licenses in 2025, reporting a change to greater regulatory alignment.
Solutions fueled by AI for market analysis, risk management and execution strategies
Artificial intelligence (AI) also plays an expanding role in crypto trading, with more than 70% of companies adopting solutions fueled by AI for market analysis, risk management and execution strategies. The report identifies cross -trading strategies and automated settlement solutions such as the most promising AI applications.
Coverage remains a critical concern for institutional merchants. The report finds that the options and term contracts are the favorite instruments to manage exposure to cryptography, with 66.7% of respondents considering options as the most viable coverage. However, the low liquidity of the markets of cryptographic derivatives continues to limit their generalized adoption.
For the future, the report predicts a more in -depth consolidation of the market as crypto trading infrastructure mature. In T1 2024, mergers and acquisitions in the cryptography sector increased by 22%, a trend should accelerate while institutions are looking for the scale and operational efficiency.
The report concludes that if the fragmentation of the cryptography market poses challenges, it also presents innovation opportunities in the aggregation of liquidity, the execution of trade and the settlement mechanisms. As regulatory executives are evolving and institutional participation increases, the market structure should become more efficient and transparent.
