Wintermute Says Crypto Liquidity Is Stuck at the Top in BTC and ETH
Why Did Liquidity Stop Spreading Across Crypto Markets?
Crypto liquidity stopped dispersing across the market in 2025 and instead pooled around BTC, ether, and a narrow group of large-cap tokens, according to Wintermute’s latest digital asset OTC report. The market maker said this concentration altered how capital moved through crypto, breaking with patterns viewn in prior cycles where gains in majors often spilled into altcoins.
“Capital no longer spreads broadly across the market,” Wintermute wrote, noting that liquidity has become unevenly distributed and increasingly dependent on where institutional flows enter. companies were cited as major contributors, as both channels direct capital primarily into the most liquid assets rather than across the wider token universe.
The result has been a market where depth builds at the top while much of the long tail struggles to sustain momentum. Instead of broad risk-on phases, performance has become fragmented, with returns hinging on asset-specific inflows rather than cyclical rotation.
Investor Takeaway
What Happened to Altcoin and Memecoin Rallies?
Wintermute found that altcoin rallies in 2025 were shorter and less durable than in previous years. The firm reported that the median narrative-driven altcoin rally lasted around 19 days, down sharply from roughly 61 days in 2024. Memecoin activity, which had acted as a liquidity magnet in earlier cycles, faded ahead in the year and failed to reassert itself.
Rather than sustained trends, activity outside major tokens appeared in brief bursts tied to specific themes. Wintermute pointed to episodic interest around memecoin launchpads, , and new payment or API-related primitives. These moves, however, showed limited continuation, with capital exiting rapidly once initial momentum sluggished.
This compression in rally duration has reduced opportunities for rotation strategies that previously relied on extended narrative phases. According to the report, capital formation outside the top assets now depends on sharper timing and more selective participation.
How Are Institutions Executing diversely?
The report highlighted a clear shift in how large counterparties trade. Institutional participants showed less directional conviction and greater focus on tactical positioning around events and headlines. Rather than betting on multi-month themes, execution patterns reflected recurring, deliberate trades aimed at managing exposure more tightly.
Seasonal strategies that once defined crypto cycles, such as predictable year-end strength, lost relevance in 2025. Wintermute said execution has become more disciplined, with institutions prioritizing efficiency and flexibility over broad directional bets.
On the derivatives side, off-platform activity expanded. Wintermute observed wider use of for difference as a capital-efficient way to gain exposure across multiple assets without committing large balance-sheet resources. Options also became a central portfolio tool, with systematic and yield-focused strategies replacing the one-way positioning that dominated earlier market phases.
Investor Takeaway
Why Do Liquidity Pathways Matter More Than Sentiment?
A key conclusion of the report was that how capital enters the market now shapes outcomes as much as overall risk appetite. Wintermute said structured channels such as ETFs and programs have become dominant liquidity pathways, concentrating depth in assets that qualify for those vehicles.
This has supported majors while limiting spillover into mid- and small-cap tokens, contributing to a largely range-bound environment for most of the market. Even during periods of positive sentiment, the lack of broad capital rotation has capped upside outside a handful of names.
Wintermute noted that this pattern aligns with other institutional research pointing to rising off-platform execution as firms prioritize settlement securety and execution quality. Together, these factors suggest a market increasingly shaped by institutional plumbing rather than retail-driven momentum.
What Does This Mean Heading Into 2026?
Looking ahead, Wintermute argued that 2025 may mark the begin of crypto’s transition away from clean, narrative-led cycles. Future performance, it said, will depend on whether liquidity broadens beyond a small group of large-cap assets or remains constrained at the top.
For dispersion to return, Wintermute said corporate purchaviewrs operating through ETFs and treasury vehicles would need to widen their mandates to include more assets. Strong performance in major tokens could also trigger rotation, while a renewed surge in retail participation could introduce fresh capital through stablecoin issuance.
The firm cautioned that the last scenario appears less likely under current conditions. If liquidity pathways remain narrow, may continue to favor tactical trading and selective exposure over the broad, sweeping rallies that defined earlier cycles.
