Liquidity Crunch Gripping Crypto Market Makers, Says Tom Lee

Friday Nov 21 2025 01:10

Duration

2 min

  1. 1. Liquidity Squeeze on Crypto Market Makers: Tom Lee's Analysis

  2. 1.1 The Crucial Role of Market Makers

  3. 1.2 Bitcoin's Trajectory After the Correction

  4. 1.3 Potential Recovery Timeline

Liquidity Squeeze on Crypto Market Makers: Tom Lee's Analysis

Recent downward pressure in the cryptocurrency market could stem from significant balance sheet vulnerabilities among market makers, according to Tom Lee, chairman of Ether treasury company BitMine. Speaking with CNBC, Lee posited that the October 10th market correction, which witnessed a record $20 billion in liquidations, caught some market makers off guard, leading to substantial liquidity challenges. With diminished operational capital, compounded by reduced revenue from traders, market makers face a challenging environment. Consequently, they've been compelled to further shrink their balance sheets to free up capital. "If they've got a hole in their balance sheet that they need to raise capital [to fill], they need to reflexively reduce their balance sheet, reduce trading. And if prices fall, they've got to then do more selling. So I think that this drip that's been taking place for the last few weeks in crypto reflects this market maker crippling," Lee explained.

The Crucial Role of Market Makers

Lee, also the co-founder of Fundstrat, likened the significance of crypto market makers to that of "central banks," suggesting that the market may endure further volatility for a few weeks until these liquidity issues are resolved. "Today's stock market looks a lot like an echo of what happened on October 10th. But on October 10th, that liquidation was so big [...] it really crippled market makers," he stated. "And market makers are critical in crypto because they provide liquidity. I mean, they act almost as the central bank in crypto."

Bitcoin's Trajectory After the Correction

Bitcoin (BTC), valued at over $121,000 before the October 10th correction, has since retraced to $86,900, mirroring the broader market trend.

Potential Recovery Timeline

Lee anticipates potentially another two weeks of market maker unwinding before the market initiates a recovery. He referenced a similar event in 2022: "And so in 2022, it took eight weeks for that to really get flushed out. We're only six weeks into it. So I kind of concur. I think crypto, Bitcoin and Ethereum are in some ways a leading indicator for equities because of that unwind. And now this sort of limping and weakened liquidity."

Risk Warning: this article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform.When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice. Trading cryptocurrency CFDs and spread bets is restricted for all UK retail clients. 

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Written by:

Liam James

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