To download the full market map, please complete this tally form - here - so that we can send it to you.
The digital asset liquidity landscape has evolved beyond traditional market-making paradigms, necessitating a new taxonomy that reflects the complexity and adaptive nature of the market. Fundamentally, digital asset liquidity providers (LPs) are either institutional market makers or decentralized participants whose responsibility is to bridge the gap between buyers and sellers, providing market stability and improved access. This is not dissimilar to the role that LPs play in traditional financial markets. However, the digital asset ecosystem is fragmented and rapidly evolving which requires innovative solutions to their unique problems.
Digital asset liquidity often hinges on specific trading pairs, where one token might have adequate liquidity and the other does not (1). This is a unique challenge that digital asset LPs are looking to solve. Given the pace at which the digital asset economy is evolving due to the emergence of new regulation, constant development of new financial products, and substantial growth in market participants, the roles LPs play in the digital asset economy are nuanced.
The future is not about one-size-fits-all solutions and digital asset LPs are always looking to differentiate themselves and establish competitive advantages. As a whole, the industry is building a more efficient, transparent, and adaptive future.
In this article, we provide a thorough overview of what liquidity is, its role in the digital asset economy, and how businesses in need of liquidity should go about selecting their liquidity providers. Furthermore, we introduce a four-factor framework for categorizing LPs, capturing the nuanced interplay between operational models, service layers, asset focus, and regulatory positioning. Conventional classifications are primarily segmented by centralization level, but our mapping illustrates how modern LPs operate across multiple layers simultaneously, enabling a better understanding of market structure and competitive dynamics.
The global digital asset market relies on a complex ecosystem of liquidity providers (LPs) that ensure efficient trading, price stability, and market accessibility. These LPs operate across centralized and decentralized platforms, catering to diverse participants ranging from retail traders to institutional investors. Below is a detailed categorization of the liquidity providers shaping today’s crypto markets, constructed to highlight their unique roles, operational nuances, and interdependencies.
We have structured our market map based off of four key factors:
Our market map has six main categories:
See below for our detailed market map framework:
The digital asset economy is rapidly evolving thanks to constant innovation, regulatory developments, and the substantial growth in institutional and retail participation. This market dynamism has seen fundamental changes in the roles LPs play.
The increase in institutional adoption and interest has pushed digital asset LPs to provide traditional prime brokerage services in which they offer sophisticated trading, custodial services, and automated market making. We will see further development and additional offerings of institutional-grade liquidity and robust risk management in order to continue to attract large players into the digital asset market. An example of this is with Aztec’s zk.money, a zero-knowledge liquidity solution that enables private LP positions in order to attract institutional traders. Additionally, expect to see LPs experimenting with and adopting dynamic fee structures, liquidity concentration strategies, and hybrid models (1).
A central problem that is being tackled by LPs is the fragmented nature of liquidity across blockchains and how liquidity becomes siloed (1). Cross-chain liquidity solutions enable trading efficiencies, improved price discovery, and less market volatility. An example of this is Amber Group offering JPY/KRW stablecoin pairs with embedded FX hedges. The LPs play a crucial role in enabling cross-chain development through the creation of cross-chain bridges and omnichain protocols to enable the seamless exchange of assets that fundamentally increase flexibility, scalability, and efficiency in the market.
LPs differentiate themselves through technological innovation, specifically in AI, as in virtually every industry. LPs are integrating AI and machine learning to improve predictive analytics and algorithmic optimization, an example of this is Auros deploying LLMs to simulate CEX/DEX flow correlations in real time. Given the 24/7, 365 nature of digital assets, AI further enables liquidity and provides the market with the required agility, responsiveness, and optimization for further adoption and growth.
As the EU has implemented their Markets-in-Crypto-Assets (MiCA) framework, and the new presidential administration in the USA, regulatory changes are centre stage. The US and Asia are next to develop and implement their regulatory frameworks and the expectation is that with additional regulatory guidelines there will be further transparency around market activities and consumer protections that will vastly improve market confidence and stability.
Furthermore, market leading LPs have been seen to have a mix of the following four characteristics:
The future of digital asset liquidity belongs to adaptive LPs who embrace innovation and flexibility. Success hinges on developing customer-centric strategies that directly address critical market pain points and maximize value across the ecosystem. As the landscape evolves, LPs must shift from rigid, traditional approaches to modular, hybrid solutions. Agile providers who tailor their solutions to emerging market needs will capture the growing opportunity. The winners in this market will not be defined by size alone, but by their ability to evolve alongside their customers’ sophisticated demands.
Liquidity is the lifeblood of any financial market and the digital asset economy is no different. Liquidity ensures seamless trading, market stability, and scalability.
Understanding liquidity and what affects it, along with how to choose the right liquidity partners is critical for businesses. We outline the foundational elements to provide actionable insights into the digital asset liquidity landscape.
Liquidity in digital assets refers to the ability to quickly and efficiently buy, sell, and swap assets at stable, close-to-market prices with minimal price slippage (price slippage is when a trade is executed at a different price than what was intended). A liquid market ensures that transactions are executed without significant disruptions to asset prices.
Key characteristics of liquidity:
Liquidity is a fundamental determinant of market health and stability, and it affects every market participant across the ecosystem:
Businesses, especially Crypto-Asset-Service-Providers (CASPs), benefit from high liquidity in several ways:
The level of liquidity in digital asset markets is influenced by three key factors:
There are additional external factors that also impact liquidity, including:
Liquidity providers act as intermediaries, ensuring smooth trade execution by supplying assets to trading pairs. They primarily provide the following services:
Liquidity providers are essential for CASPs, enabling them to meet regulatory requirements, enhance trading efficiency, and provide a seamless user experience.
When selecting a liquidity provider, businesses should evaluate the following factors:
Businesses should consider leveraging multiple LPs as diversification is important. Relying on a single LP can create operational risks if the provider experiences disruptions. Using multiple LPs ensures redundancy and flexibility. It is essential that businesses utilize LPs effectively based on their strengths, such as asset specialisation, trading volume, or regional expertise.
Overall, liquidity is the backbone of the digital asset ecosystem, influencing market stability to user confidence. Through understanding what liquidity is, why it matters, and the factors that affect it, businesses can make informed decisions when choosing liquidity providers.
For CASPs operating in a regulated environment, selecting the right LP partners is not just a strategic advantage, but a necessity for maintaining compliance, enhancing trading efficiency, and fostering long-term growth.
The digital asset market is experiencing a transformative period marked by unprecedented liquidity depth and institutional engagement and adoption.
As we progress through 2025, the market has achieved significant milestones, including a $3.76 trillion market capitalization (2) and projected institutional investments exceeding $500 billion in 2025 (3). The approval of Bitcoin and Ethereum ETFs has catalyzed this growth, with 47 active crypto ETFs filings now demonstrating the market’s maturation (3) and shift beyond Bitcoin and Ethereum.
Decentralized exchanges (DEXs) are gaining significant traction as well, with DEXs expected to capture 20% of centralized exchange (CEXs) volumes with projected trading to exceed $4 trillion in 2025 (4). The stablecoin ecosystem is also emerging as a crucial bridge between traditional and digital finance with daily settlement volumes expected to reach $300 billion by the end of the year (4), and according to Artemis, Stablecoin supply has already exceeded $200 billion (see graph below).
This growth is underpinned by favourable regulatory developments, technological development in DeFi and AI integration that is enabling faster transactions, and increasing institutional-grade product offerings.
As major financial institutions continue to integrate digital asset services and regulatory frameworks evolve and are implemented, the market is positioned for sustained growth in both liquidity depth and fiat-to-crypto service adoption (5). This convergence of factors signals a robust foundation for the digital asset market’s continued growth and mainstream financial integration.
By integrating with a diverse network of market makers and liquidity partners, Merge enables efficient fund movements, facilitates netting opportunities, and optimizes liquidity management across multiple currencies and payment rails.
Our team’s expertise in assessing your business needs allows us to provide clear and efficient guidance on the best structure for your liquidity needs. By partnering with Merge, your business will simplify and optimize your access to liquidity.
%20Regulation%20-%20thumb.jpg)