The post Crypto Market Faces Liquidity Challenges as Token Supply Grows appeared on BitcoinEthereumNews.com.

Increasing token supply and declining liquidity create a market prone to manipulation and unexpected price movements. Understanding market cycles and recognizing shifting sentiment is crucial for making informed decisions and managing risks effectively. In recent weeks, the crypto market has faced a challenging reality that many investors have found difficult to accept. The dreams of an explosive altcoin season are gradually receding, not because the possibility has been lost totally, but rather because the present market conditions cannot support it. Imagine a casino where the number of players stays the same or declines yet the slot machines occupy an ever growing share. That’s the situation with altcoins. Every day, new projects are arising to produce a supply much beyond demand. Right now, more than 36 million distinct tokens are competing for the interest of investors. If that wasn’t enough, over $25 billion in tokens will be unlocked between January and April, augmenting the deluge of supply saturating the market. Crypto Market Manipulation Rises as Liquidity Drops On the other hand, liquidity in the market is shrinking. Since December 2024, capital inflows into crypto have dropped by over 70%. As liquidity decreases, the market becomes more and more easily manipulated. This is evident in the erratic price movements: false breakouts, momentary price spikes, and sudden trend reversals that seem designed only to trap unwary traders. More worrying, however, is how the market is currently responding to news. In the past, announcements such as Donald Trump’s adoption of Bitcoin, the possibility of an ETF for Solana, Dogecoin, and XRP, and large investment funds buying Bitcoin would immediately push the price up. Now none of that seems to count. Negative news instead rapidly upsets the market. Repeating Market Cycles in Crypto If this pattern rings familiar, it’s no coincidence. A similar situation occurred…

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Filed under: News - @ February 23, 2025 9:11 am