AI Capital Rotation Drains Crypto Liquidity Amid Market Slowdown
The crypto market slowdown has been puzzling traders this year, but according to Spencer Hallarn, Head of Markets at GSR, the culprit may not be within the crypto space itself. Instead, Hallarn points to capital rotating into artificial intelligence infrastructure, pulling liquidity away from crypto markets.
Big tech firms have been raising massive sums through equity issuance to fund AI development, which tightens market liquidity and affects asset classes across the board, including crypto.
Clients are adapting to this environment by shifting focus towards long-term budget planning, OTC hedging, and real-world assets, reflecting a defensive posture in a market waiting for clearer signals.
Tokenization platforms with heavy KYC requirements are struggling to generate meaningful transaction volume due to the friction built into onboarding and compliance processes.