Decreased Bitcoin Activity and Liquidity Point to Imminent Volatility Spike

Dominance of blue-chip crypto assets and stablecoins USDT and USDC, now make up a staggering 78.5% of the total market cap

article-image

James.J/Shutterstock, modified by Blockworks

share

As the crypto market edges closer to the end of another week, recent data reveals a somber scene across the digital assets trading landscape.

Major crypto, including ether (ETH), bitcoin (BTC), and binance coin (BNB), have all taken a slight dip, suggesting an overall downturn in the market, research firm K33 wrote in a note on Tuesday.

Gordon Grant, Co-Head of Trading at Genesis Trading, expressed concerns about the lack of a macro catalyst for BTC and ETH, which have hindered a market recovery since the previous quarter.

“As implied volatilities stare down cyclical lows and majors look to have staved off another thwarted assault on trend support, similarly sloppy price action into Friday expiry could be in store if correlative risk assets find their feet,” Grant said.

The small fry in the crypto pool — fondly known as “small cap altcoins” — have taken a more substantial hit. Evidence points to investors swerving away from these riskier bets.

Dominance of blue-chip digital assets and their stablecoin counterparts, USDT and USDC, now make up a staggering 78.45% of the total market cap. The last time that figure was that high was in February 2021, hinting at a smaller appetite for riskier digital assets, K33 said.

Bitcoin, the industry’s bellwether, has managed to claw back some losses from last week’s 10% decline. BTC is flat at 0.3% over a 7-day period to $26,800, Blockworks Research data shows.

In a climate where excitement is the name of the game, it’s a little too quiet for comfort — volumes are on a downward trajectory, driving up bitcoin’s intraday volatility, crypto firm Kaiko wrote in a recent research note.

“The ongoing turmoil in US regional banks and the highly publicized debate on the US debt ceiling are negatively affecting risk sentiment,” the research firm said.

This cooling-off period in the crypto market comes as more market makers announce a scale-down of their bitcoin operations, causing a ripple effect of decreased liquidity. 

Last week, notable market makers Jane Street and Jump Crypto announced plans to lessen their US crypto exposure due to regulatory uncertainty within the country.

This transition has led to a redistribution of volumes from centralized exchanges to futures contracts traded on the Chicago Mercantile Exchange, indicating investors’ worries about the risks associated with centralized credit, Blockworks previously reported.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Research Report Templates (8).png

Research

Meta-aggregators like Titan and Kamino Swap improve price execution for users, making the Solana swapping landscape more competitive. Jupiter has incorporated meta-aggregation features into its latest routing engine to keep users on its front end (own the user, own the flow). At large, teams are treating swaps as a commoditized complement, offering incredibly cheap or free swaps to own the end-user and increase demand for high-margin product offerings (multi-product DeFi). On another note, the divergence in the concentration of aggregator volume between DEXs suggests increased specialization at the DEX layer by asset type.

article-image

Many community banks and credit unions feel like they missed the fintech craze — and they don’t want to miss stablecoins

article-image

BlackRock COO Rob Goldstein noted that the firm had been looking into crypto since 2017

article-image

With the June FOMC meeting coming up, the Fed remains unlikely to cut interest rates. Is this the right move?

article-image

The crypto-optional shooter is expected to release on Steam in a few weeks

article-image

The new airdrop campaign reaches 50,000 users, setting the stage for Spark’s 10-year token distribution