What’s causing liquidity concerns in the crypto market?

New cryptocurrency issuance hit a record high in January, sparking concerns among analysts about a lack of investor liquidity in the market.

According to GeckoTerminal data shared by CoinGecko co-founder and COO Bobby Ong, more than 600,000 new cryptocurrencies were issued in January, a 12-fold increase compared to the same period in 2024.

“As early as 2022-2023, approximately 50,000 new tokens will be minted every month,” Ong wrote in a Feb. 14 X post.

“Fast forward to Q4 2024 and we’re seeing 400,000 new tokens created per month — with January 2025 setting a record of 600,000 new tokens created per month!” he added.

The number of tokens created by GeckoTerminal. Source: Bobby Ong

Ong said platforms like Pump.Fun have facilitated this token proliferation by simplifying token creation.

Gabriel Halm, a research analyst at crypto intelligence platform IntoTheBlock, said the increase in token issuance also reflects the “natural exuberance of the bullish crypto market.”

“As a result, the wide variety of tokens today disperses liquidity and investor attention, leading to more disjointed price action,” he noted.

More established altcoins also lack the momentum to recover to their 2021 highs due to illiquidity in the crypto market. However, analysts predict that the altcoin season will be delayed due to the fragmentation of tokens caused by the increasing number of cryptocurrencies.

TradFi Institutional Is Changing the Crypto Liquidity Rotation

In previous cryptocurrency bull runs, profits from Bitcoin’s gains would flow into Ethereum and then into altcoins and more speculative meme coins.

Cryptocurrency market flows. Source: Rekt Capital

However, Halm said that increased institutional participation is changing the dynamics of market liquidity flows:

“With the near-exponential growth of new crypto assets, the emergence of traditional financial institutions as players in the space will inevitably change the liquidity rotation seen in previous cycles and reform the way capital flows in the crypto space.”

CoinGecko’s Ong also pointed to fragmented liquidity as an issue contributing to the lack of momentum in the cryptocurrency market.

“There are too many tokens, each distracting traders from their limited attention and liquidity. This is why we haven’t seen the great alt pumps of previous cycles,” Ong said in a subsequent X post.

He added that at the current rate, the cryptocurrency industry could exceed 1 billion tokens in the next five years.