Crypto Liquidity, Not Volatility, Is the Real Barrier to Institutional Adoption

Crypto markets have spent much of the past year highlighting rising institutional interest, but a deeper structural issue continues to hold back large-scale participation: insufficient market liquidity. According to Jason Atkins, chief commercial officer at crypto market maker Auros, the industry’s biggest challenge is not volatility, but the inability of current market depth to absorb institutional-sized capital without causing price disruption.

Speaking ahead of Consensus Hong Kong, Atkins explained that while institutional appetite for digital assets exists, the infrastructure to support it at scale remains fragile. Large financial players require markets that can handle significant trade sizes, allow efficient hedging, and enable clean exits during periods of stress. Without these conditions, even willing institutions are forced to remain cautious.

Crypto liquidity, Atkins noted, has not dried up due to waning interest. Instead, major deleveraging events, such as sharp market crashes, have removed leverage and active traders faster than they can return. Because liquidity providers respond to demand rather than create it, reduced trading activity leads market makers to scale back risk. This creates thinner order books, higher volatility, and stricter risk controls, reinforcing a cycle that keeps markets unstable.

Crucially, Atkins emphasized that volatility itself is not a dealbreaker for institutions. The real issue arises when volatility meets illiquid markets, making positions difficult to hedge or unwind. For large allocators operating under capital preservation mandates, liquidity risk outweighs potential returns. The priority is not maximizing yield, but achieving returns without jeopardizing capital.

Atkins also rejected the idea that capital is simply shifting from crypto to artificial intelligence. While AI is experiencing a surge in attention, crypto is further along in its cycle and now facing consolidation. Many foundational innovations, such as automated market makers and decentralized exchanges, are no longer novel, reducing fresh engagement drivers.

Ultimately, the crypto liquidity problem is structural rather than cyclical. Until markets can reliably absorb size, manage risk, and provide institutional-grade liquidity, large-scale capital will remain on the sidelines. Interest may persist, but liquidity—not hype—will determine when institutions fully enter the crypto market.