The cryptocurrency market has recently shown signs of calming down.
Liquidity is the main force driving the cryptocurrency cycle, but recent trends suggest that the flow of new funds into the market is slowing.
Analysts at Wintermute note that cryptocurrencies are in a “self-funding phase” rather than an expansion phase, with capital inflows through key channels such as stablecoins, ETFs, and digital asset bonds (DATs) slowing. They suggest that liquidity is likely to return if either of these channels recovers again.
As a result, virtual currencies have entered the “self-funding stage” rather than the expansion stage.
Main channels of capital
Historically, when the global money supply increases or real interest rates fall, excess liquidity has been channeled back into riskier assets such as cryptocurrencies.
In past cycles, most new funds flowed into cryptocurrencies through stablecoins. However, as the market matures, DATs, stablecoins, and ETFs are bringing new capital into cryptocurrencies. Analysts note that ETF assets, DAT holdings, and stablecoins issued are good measures of total capital flowing into cryptocurrencies.
momentum to slow down
However, the momentum of DAT and ETF inflows has slowed. Inflows were strong from late 2024 to early 2025, but are now declining.
Analysts say the slowdown is important because each represents a different source of liquidity. Stablecoins demonstrate how much risk crypto-native investors are willing to take on. DAT reflects financial institutions seeking yield, while ETFs track how much money traditional finance is putting into cryptocurrencies.
Since all three factors are slowing down, this indicates that new capital is not being invested. Market liquidity is only circulating within the system, not expanding.
However, looking at the economy as a whole, the money supply has not dried up. Higher interest rates mean some cash is being kept in safe places like Treasury bills, but overall central banks are still easing and quantitative tightening is over in the US.
However, while the environment remains supportive, liquidity is only flowing into other risk assets such as equities rather than cryptocurrencies.
Investors keep capital circulating
Investors are moving funds between major coins and altcoins, but are not adding new funds. This is why this cycle’s rally was short.
However, analysts note that funds could flow back into cryptocurrencies if one of the main sources of liquidity recovers. “Until then, cryptocurrencies will remain self-funded, with capital circulating rather than compounding. ” analysts say.
Bitcoin awaits new momentum
Analysts at Cryptoquant note that Bitcoin’s bullish score hit 0 for the first time since January 2020, indicating a pause after a long bull run. Historically, this indicates either a macro bottom or a late-cycle distribution, which suggests we may be in a late bull to early bear phase.
For Bitcoin to recover, ETF inflows, increased liquidity, and long-term holder accumulation will need to return, or it could enter an extended consolidation phase.
Cryptocurrency liquidity flows have slowed, but some analysts remain bullish.
Analyst Michael van de Poppe says the market is not in a bearish phase, but instead is experiencing a normal correction within a long-term Bitcoin bullish cycle.
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