What is causing concern in the encryption market's Liquidity?

In January, the new Crypto Assets issuance reached a record high, triggering analysts' concerns about the lack of investor Liquidity in the market.

According to the data from GeckoTerminal shared by Bobby Ong, Co-founder and Chief Operating Officer of CoinGecko, over 600,000 new cryptocurrencies were issued in January, an increase of 12 times compared to the same period in 2024.

"As early as 2022-2023, about 50,000 new tokens will be minted every month," Ong wrote in a post on February 14th.

"Fast forward to the fourth quarter of 2024, we see 400,000 new tokens created every month - a record 600,000 new tokens created in January 2025!" he added.

Token amount created by GeckoTerminal. Source: Bobby Ong

Ong said that platforms like Pump.Fun have simplified token creation and facilitated the surge of this token.

Gabriel Halm, a research analyst at the encryption intelligence platform IntoTheBlock, stated that the increase in token issuance also reflects the natural prosperity of the bullish encryption market.

"Therefore, the wide variety of tokens now has scattered Liquidity and investors' attention, leading to more disconnected price trends," he pointed out.

Due to the lack of Liquidity in the Crypto Assets market, more mature altcoins also lack the momentum to recover to their 2021 highs. However, analysts predict that due to the increasing number of Cryptocurrencies leading to token dispersion, the altcoin season will be delayed.

TradFi institutions are changing the rotation of Crypto Assets Liquidity

In the previous Crypto Assets bull market, the profits brought by the rise of Bitcoin will flow into Ethereum, then into altcoins and more speculative Meme coins.

Crypto Assets market liquidity. Source: Rekt Capital

However, Halm stated that the increasing institutional participation is changing the market Liquidity dynamics:

"With the near exponential growth of new encryption assets, the emergence of traditional financial institutions as participants in this field will inevitably change the liquidity rotation that occurred in the previous few cycles, reforming the capital flow in the encryption sector."

Ong from CoinGecko also pointed out that the lack of Liquidity is the issue causing the Cryptocurrency market to lack momentum.

"There are too many tokens, and each one can distract traders from their limited attention and liquidity. That's why we haven't seen the great alt skyrocketing in previous cycles," Ong said in a subsequent X post.

He added that, at the current pace, the Cryptocurrency industry may exceed 1 billion tokens in the next five years.