Liquidity in crypto markets continues to lag behind traditional finance due to fragmentation, technical design differences, and exposure to external shocks, according to a new report from S&P Global.
The study analyzed key liquidity metrics, volume, bid-ask spreads, market depth, and slippage, across centralized and decentralized trading venues for Bitcoin (BTC), Ethereum (ETH), and major stablecoins.
The report showed that crypto trading platforms are becoming more efficient but remain fractured across hundreds of markets, with liquidity profiles varying by exchange, asset pair, and trade size.
Spot trading volumes on exchanges like Binance still fall well short of traditional venues like the NYSE, and fiat-based trading pairs consistently exhibit shallower order books compared to crypto-native pairs.
CEX vs. DEX
Centralized exchanges (CEXs) mirror traditional stock markets in their reliance on order books and custodial accounts. They offer high speed and low spreads on popular stablecoin pairs, especially large-cap coins like Bitcoin.
In contrast, decentralized exchanges (DEXs) allow users to maintain custody through automated market makers (AMMs) but introduce price slippage and impermanent loss, especially during volatile periods or large trades.
Despite these challenges, some digital assets, particularly BTC, ETH, and USDT, show comparable or even narrower bid-ask spreads than mid-cap equities like Broadcom.
Overall, CEXs continue to dominate volume in the market and provide higher liquidity compared to their decentralized counterparts, which provide deeper access.
The report also noted that the launch of Bitcoin and Ether ETFs in the US has increased trading activity and deepened liquidity on crypto exchanges, though ETF trading volumes remain smaller than their underlying assets.
Infrastructure constraints
S&P also highlighted how political instability and exchange hacks can significantly impact localized liquidity, a prevalent issue in the crypto industry.
A political crisis in South Korea triggered a 30% drop in BTC-KRW pricing on Upbit in December 2024, while a February breach at Bybit led to a sustained decline in ETH trading volume. These disruptions underline the fragility of fragmented order books.
The report also highlighted that stablecoin liquidity remains higher in crypto-to-crypto trades than in fiat pairs, due to banking hurdles and compliance friction. However, their growth combined with easing regulations could enforce their role in finance.
Meanwhile, slippage analysis on Uniswap shows that low-volatility stablecoin pairs maintain near-zero slippage, while ETH pairs can show high variation, especially during sharp price moves.
According to the report, while crypto market liquidity is maturing with the entry of institutional investors and regulated products, fragmentation, design limitations, and inconsistent depth continue to hinder full-scale efficiency.
