Crypto Liquidity Shifts: BTC & ETH Dominate, Memecoins Fragment

The crypto market has seen significant changes in liquidity and trading dynamics this year. The introduction of ETFs and structured money flow has concentrated liquidity in Bitcoin (BTC) and Ethereum (ETH), making it more programmatic during US hours.

This shift has had a ripple effect on the lower tiers, leading to thinner and faster markets for smaller-cap tokens. While it may seem like memecoins have died out, they've simply migrated and fragmented into new venues and rails that reduce friction for retail-style flows.

According to CoinDesk, Robinhood Chain, a layer 2 launched in July, has been doing over $800 million in daily turnover on decentralized exchanges (DEXs), mostly with memecoins. This trend shows that liquidity is shifting towards newer L2s and on-chain trading of tokenized equities.

As the market continues to evolve, traders need to be aware of the new risks and dynamics at play. Governance capture, bridge risk, and MEV (Maximal Extractable Value) remain significant concerns. It's essential to monitor time-of-day liquidity clumping around US market hours for institutional trades and drifting towards weekends for memecoins.