The first bad block appeared at height 4,487,776 at 15:44 UTC on Aug. 7. Once the weakness had been demonstrated on the live network, others appeared to copy it and produce invalid blocks of their own. Ravencoin has since released a fix, but patching the software does not undo what is already written.

The two pools, 2Miners and RavenMiner, are building their version from block 4,487,775, the last one before the exploit. The project said it asked them to restart from a more recent point, which would put less history at risk, but they declined.

Some transactions caught in the gap may be picked up again and recorded on the replacement chain. Ravencoin further warned exchanges and other services not to assume that deposits or withdrawals wiped out this way will return on their own, and advised them to suspend both until the network settles on a single version.

Exchanges have started responding. Bitvavo suspended RVN deposits and withdrawals as a precaution, citing the exploited vulnerability. South Korea’s Upbit placed an investment warning on RVN across its won, bitcoin and tether markets and also stopped deposits.

The project stopped short of endorsing the pools’ plan, saying the details were being shared for transparency rather than as support for any particular version of the chain.

Australia’s financial crime watchdog suspended crypto ATM operator Cryptolink Pty Ltd for three months, forcing the firm to shut down 96 machines across the country.

The Australian Transaction Reports and Analysis Centre, known as AUSTRAC, said the suspension took effect Aug. 9. Cryptolink cannot provide virtual asset services while the order remains in place.

Crypto ATMs allow customers to use cash to buy cryptocurrency, serving as a bridge between fiat currency and crypto. AUSTRAC said it remains concerned about Cryptolink’s ability to manage transactions that carry a higher risk of money laundering or terrorism financing.

The regulator said Cryptolink initially met the terms of an enforceable undertaking imposed in October 2025. The company later failed to submit required threshold transaction reports and did not respond to an AUSTRAC information request.

AUSTRAC CEO Brendan Thomas said those failures made the business “too high risk to continue operating at present.”

The earlier undertaking followed an investigation by AUSTRAC’s Cryptocurrency Taskforce into alleged breaches of anti-money laundering and counter-terrorism financing rules. The regulator cited late transaction reports and weaknesses in Cryptolink’s risk assessments.

AUSTRAC also issued Cryptolink a fine of 56,340 Australian dollars ($36,600), which the company paid.

Bitcoin price fell below $64,000 on Aug. 11 as rising oil prices and uncertainty before the U.S. inflation report weakened risk appetite, leaving traders focused on whether the $63,900 support level can prevent a deeper correction.

Bitcoin price drops below $64,000

According to data from crypto.news, Bitcoin (BTC) price traded as low as $63,852 on Binance before recovering to approximately $64,281 at the time the daily chart was captured. The intraday rebound reduced the loss, but BTC remained below the $65,000 level that buyers had attempted to establish as support over the previous four days.

The decline followed another deterioration in U.S.-Iran negotiations over reopening the Strait of Hormuz. Brent crude rose above $89 a barrel as reduced hopes for an agreement renewed concerns about energy supplies and inflation.

Higher oil prices can complicate the Federal Reserve’s inflation outlook by raising transportation and production costs. That pressure reduced demand for risk assets as U.S. traders prepared for the July Consumer Price Index report.

Broader crypto markets also weakened during the move. Ether and XRP fell more than 2%, while Bitcoin lost the $64,000 level after failing to hold above $65,000.

SoSoValue data shows that institutional demand offered limited support. U.S. spot Bitcoin exchange-traded funds recorded $144.6 million in net outflows on Aug. 10, ending five consecutive sessions of positive flows. The reversal reduced one source of spot demand as macroeconomic uncertainty increased.

Daily chart shows Bitcoin trapped in consolidation

The daily chart shows that Bitcoin’s price remains locked inside the broad range formed after the June decline. BTC has repeatedly found buyers near $60,000–$63,000, but attempts to establish a sustained recovery above $65,000 have failed.

The asset was trading slightly above its 20-day simple moving average at $64,219 and its 50-day SMA at $63,392. Holding both averages would keep the short-term recovery structure intact despite the latest sell-off.

However, the wider trend remains under pressure. Bitcoin continues to trade below the 100-day SMA at $67,628 and the 200-day SMA at $69,918. Those averages are also sloping downward, creating a large resistance area between approximately $67,600 and $70,000.

The daily relative strength index stood at 50.31, almost level with its signal line at 50.10. The reading shows that neither buyers nor sellers have decisive momentum. It also supports the view that Bitcoin remains in consolidation instead of entering a confirmed directional trend.

A daily close below the 50-day SMA at $63,392 would weaken the recovery and expose $62,000, followed by the June-July demand zone between $57,500 and $60,000. Conversely, a close above $65,500 would give buyers another opportunity to challenge the 100-day SMA.

$63,900 is the key Bitcoin support

The 4-hour chart places immediate support between $63,900 and $64,000. Bitcoin briefly moved that region below during the sell-off before recovering, indicating that buyers were still active around the weekly midpoint.

Trader Lennaert Snyder described $63,900 as an important level because it represents the 50% mark of the previous weekly candle. He said holding or losing that price could determine momentum for the remainder of the week.

Under the bullish scenario, continued support near $63,900 could produce another move toward the previous weekly high around $65,500. That level rejected Bitcoin during its latest advance and remains the first major barrier above the current range.

A bearish break would become more convincing if BTC loses $63,900 and falls below the recent $63,200 low. Such a move could send BTC price toward $62,000 and allow sellers to target the lower part of the wider consolidation range.

The 4-hour Supertrend has turned bearish, placing resistance at $65,210. Bitcoin also slipped below the indicator’s former support near $64,344 during the decline. Bulls must reclaim both levels before the short-term trend can return to a stronger position.

Bull-bear power stood at negative 612, confirming that sellers had regained short-term control. However, the negative reading was smaller than the extreme levels recorded during earlier June sell-offs, suggesting that bearish momentum had not yet reached capitulation conditions.

Trader Daan Crypto Trades similarly identified $64,000 as the main pivot. He noted that BTC had closed slightly below the 4-hour 200-period moving averages but had started to stabilize, with several large-cap altcoins still showing relative strength.

Liquidation heatmap points to $63,700 and $65,600

The one-week CoinGlass liquidation heatmap shows large concentrations of leveraged positions on both sides of Bitcoin’s current price.

The closest downside liquidity cluster sits around $63,600–$63,800. Bitcoin tested this region during the latest decline but did not produce a sustained breakdown. A second pocket is visible between $63,200 and $63,400.

If $63,700 fails, forced selling could accelerate the move toward the lower cluster. However, the concentration of liquidity can also attract buyers looking to enter after leveraged long positions have been cleared.

The largest nearby upside band sits around $65,500–$65,700. A rebound through $65,000 could therefore trigger short liquidations and help BTC revisit the weekly high. Additional liquidity appears near $66,200 and $67,000, but those levels would require a confirmed breakout from the current range.

This positioning leaves Bitcoin vulnerable to a sharp move in either direction. Price is trading between the closest major liquidation pools, while the upcoming inflation release provides a clear catalyst for volatility.

U.S. CPI could decide Bitcoin’s next move

The U.S. Bureau of Labor Statistics will publish July CPI data on Aug. 12 at 8:30 a.m. Eastern Time. The report could influence expectations for the Federal Reserve’s September policy decision, particularly after rising oil prices renewed inflation concerns.

A cooler reading could ease pressure on Treasury yields and help Bitcoin recover $65,000. Breaking $65,500 would expose the $65,600 liquidation cluster, followed by the 100-day SMA near $67,628.

A hotter reading would strengthen the case for restrictive monetary policy and could pressure speculative assets. Under that outcome, a confirmed loss of $63,900 would shift attention toward $63,200, $62,000, and eventually the $60,000 psychological support.

Regulatory uncertainty also remains in the background. The CLARITY Act’s procedural vote was delayed until Sept. 15, removing a near-term policy catalyst that some U.S. investors had expected before the Senate recess.

For now, Bitcoin remains range-bound rather than decisively bearish. The $63,900–$64,000 zone separates a possible recovery toward $65,500 from a deeper move toward $62,000. The CPI release will likely determine which liquidity pool the market tests first.

Biggest stablecoin Tether (USDT) has shed $4 billion in market cap in just two months, but history suggests that the downturn is nearly over.

Key points:

• Tether’s 60-day rolling market-cap contraction stays near $4 billion in one of its heaviest drawdowns.
• Analysis suggests that the worst of bear-market selling pressure could be over as a result.
• Comparison to 2022 bear-market highlights an ongoing RSI divergence.

USDT drawdown puts “acceleration” of Bitcoin selling in doubt

Onchain analytics platform CryptoQuant in a blog post last week flagged market cap “undergoing one of its sharpest contractions on record.”

“The deterioration has also accelerated at the margin: nearly $870 million of USDT supply disappeared over the latest 11-day period, showing that the contraction is not merely a legacy effect from earlier redemptions,” analysts wrote. 

CryptoQuant data puts the 30-day simple moving average (SMA) of 60-day USDT market-cap change at minus $4.88 billion as of Aug. 10. 

USDT 60-day market-cap change vs. BTC/USD. Source: CryptoQuant

The extent of the drawdown echoes crypto bear markets and rivals the largest ever seen. Its severity has implications for Bitcoin and the broader market recovery. Stablecoins provide a key source of liquidity, and when this evaporates, less capital or “dry powder” is available for deployment, showing a lack of interest among investors in stepping in at a given price.

“The caution is that correlation between USDT flows and BTC price doesn’t settle causality. Both likely respond to the same risk-off conditions, with redemptions accelerating alongside spot selling rather than strictly ahead of it,” CryptoQuant analysts said. They added:

“Periods of sustained USDT expansion have generally coincided with stronger Bitcoin price regimes, while prolonged contractions have accompanied weaker demand, deeper corrections, and deteriorating market conditions.”

Expanded USDT 60-day market-cap change vs. BTC/USD. Source: CryptoQuant

The steepest 60-day contraction period for USDT market cap completed on July 13, when it reached minus $5.72 billion.

Zooming out, CryptoQuant notes that the most pronounced contraction phases have historically occurred in the final phases of macro market downturns.

“Historically, the market’s deepest USDT contraction phases have also marked points where selling pressure was closer to exhaustion than to further acceleration,” it added.

Weekly RSI divergence echoes 2022 reversal

The findings add to the mounting body of evidence that suggests the current bear market is in its final stages.

Related: Binance Bitcoin volume ratio hits record as futures outweigh spot eight times over

As Cointelegraph continues to report, consensus among market participants increasingly favors a new Bitcoin macro bottom forming before the end of 2026. Both comparisons to previous bear markets and onchain indicators, however, see the downturn continuing in the short term.

Independent analyst William Clemente’s Aug. 8 BTC outlook echoed the prognosis while describing the Bitcoin network as “fundamentally healthy.”

“I think Bitcoin is ‘cheap’ although we could have a leg lower at some point throughout the year,” he summarized. 

Two days later, he highlighted an unfolding bullish divergence between BTC/USD and the relative strength index (RSI) on weekly time frames — a classic leading indicator for a market reversal which accompanied the end of the 2022 bear market.

BTC/USD one-week chart with RSI divergences marked. Source: William Clemente on X.com

For years, blockchain ecosystems competed largely on one question: Which network can attract the most users, developers, and capital?

Ethereum built a massive DeFi economy. Solana became known for high-speed transactions and low fees. Layer-2 networks expanded Ethereum’s capacity, while newer chains introduced alternative approaches to scalability, interoperability, and application development.

But the competitive landscape is changing.

The next major battle may not be about which blockchain has the most liquidity locked inside its ecosystem. Instead, it may be about which networks, protocols, and infrastructure providers can move liquidity between ecosystems most efficiently, securely, and intelligently.

This is creating a new race for cross-chain liquidity.

As the number of blockchains continues to grow, liquidity becomes increasingly fragmented. Assets that once existed primarily within a single ecosystem can now move across multiple chains, creating new opportunities—but also new technical and security challenges.

The winners of the next phase of DeFi may therefore be the platforms that can make blockchain fragmentation feel invisible to users.

What Is Cross-Chain Liquidity?

Cross-chain liquidity refers to the ability to move, access, or utilize capital across different blockchain networks.

Imagine a user holding USDC on one blockchain who wants to participate in a lending protocol on another network. Without interoperability infrastructure, the user may need to:

1. Move assets through a bridge.
2. Convert the asset into another token.
3. Pay multiple transaction fees.
4. Wait for confirmations.
5. Navigate different wallets or applications.
6. Accept additional smart-contract and bridge risks.

Cross-chain infrastructure attempts to simplify this process.

Instead of treating every blockchain as an isolated financial island, interoperability protocols aim to connect liquidity across ecosystems.

The goal is simple:

Liquidity should be able to follow opportunity.

If lending yields are better on one chain, trading volume is higher on another, or a new application launches somewhere else, capital should ideally be able to move there efficiently.

That concept could become one of the most important foundations of mature DeFi.

Why Liquidity Fragmentation Is Becoming a Bigger Problem

The blockchain industry has evolved from a relatively small number of major networks into a highly fragmented environment.

There are Layer-1 blockchains, Ethereum Layer-2s, appchains, rollups, sidechains, modular networks, and specialized execution environments.

This creates an interesting paradox.

More blockchains create more opportunities.

But:

More blockchains can also create more fragmented liquidity.

A trader may find the best liquidity for one asset on Ethereum, the lowest transaction costs on another network, and the most attractive DeFi opportunity somewhere else.

Capital becomes scattered.

This fragmentation can produce several problems:

• Lower liquidity on individual applications
• Higher slippage
• More complicated user experiences
• Increased transaction costs
• Liquidity trapped inside isolated ecosystems
• Greater reliance on bridges and interoperability infrastructure
• More difficult capital management for DeFi users

For decentralized finance to become a truly interconnected financial system, liquidity cannot remain permanently trapped within individual chains.

The Evolution of Cross-Chain Infrastructure

Cross-chain technology has gone through several generations.

Early blockchain bridges largely focused on one objective:

Move an asset from Chain A to Chain B.

The process often involved locking an asset on one network and creating a corresponding representation on another.

For example:

Native Asset → Lock → Wrapped Asset → Destination Chain

Although this approach enabled interoperability, it also introduced additional points of failure.

The industry has since experimented with more sophisticated architectures.

Modern interoperability systems can involve:

• Cross-chain messaging
• Liquidity networks
• Intent-based systems
• Shared security models
• Decentralized verification
• Relayers
• Validators
• Proof-based verification
• Native asset transfers
• Cross-chain swaps

The broader trend is moving from simple token bridging toward programmable interoperability.

That distinction matters.

The future isn’t necessarily about simply moving tokens.

It is about allowing applications on different blockchains to communicate, coordinate, and execute financial actions across networks.

Cross-Chain Messaging Could Be More Important Than Bridging

One of the most important developments in interoperability is the shift from asset movement toward cross-chain messaging.

A bridge answers:

“How do I move this asset?”

Cross-chain messaging asks:

“How can this application communicate with another blockchain?”

That difference opens up much larger possibilities.

For example, a decentralized application could potentially:

• Trigger transactions on another chain
• Verify information from another blockchain
• Coordinate liquidity between ecosystems
• Manage cross-chain positions
• Execute governance instructions
• Automate treasury strategies
• Synchronize application states

This creates the possibility of cross-chain applications rather than simply cross-chain assets.

In such an environment, blockchains become less like isolated networks and more like interconnected components of a larger financial infrastructure.

The Rise of Intent-Based Liquidity

Another important development is the growing interest in intent-based systems.

Traditional DeFi often requires users to specify every step of a transaction.

For example:

Swap Token A → Bridge → Change network → Swap Token B → Approve transaction.

An intent-based system can instead allow the user to express the desired outcome:

“I want 1,000 USDC on this chain.”

The infrastructure can then determine how to execute the transaction.

Different liquidity providers, solvers, market makers, and routing systems can compete to fulfill that intent.

This introduces a new model for liquidity:

Users specify the destination. Infrastructure determines the route.

If this model scales successfully, cross-chain complexity could increasingly disappear behind the interface.

Users may not even need to know which blockchain is handling the transaction.

Liquidity Is Becoming Programmable

Traditional liquidity is relatively passive.

A pool contains assets, and users interact with that liquidity.

Cross-chain liquidity introduces something more dynamic.

Liquidity can potentially be:

• Routed
• Rebalanced
• Aggregated
• Optimized
• Automated
• Allocated according to demand
• Directed toward higher-value opportunities

This means liquidity itself is becoming increasingly programmable.

Imagine a system monitoring dozens of blockchains simultaneously.

If a particular market suddenly experiences high demand, the system could identify available liquidity elsewhere and route capital toward that opportunity.

The resulting architecture begins to resemble a global liquidity layer rather than a collection of isolated decentralized exchanges.

Why Stablecoins Are Central to the Cross-Chain Race

Stablecoins may become one of the most important assets in cross-chain liquidity.

Unlike highly volatile tokens, stablecoins are primarily used as:

• Trading pairs
• Settlement assets
• DeFi collateral
• Payment instruments
• Treasury assets
• Cross-border transfer mechanisms

This makes them natural candidates for interoperability.

A trader may hold stablecoins on one network but want to use them on another.

A DeFi protocol may accept stablecoins from multiple ecosystems.

A payment application may need to settle transactions across different chains.

As stablecoin usage expands, the ability to move stablecoin liquidity efficiently could become a major competitive advantage for blockchain ecosystems.

The race may therefore increasingly revolve around a simple question:

Which infrastructure can make stablecoin liquidity available wherever users need it?

The Security Problem: Liquidity Creates a Bigger Target

Cross-chain liquidity creates enormous opportunities, but it also creates enormous security risks.

Bridges have historically been among the most attractive targets for attackers because they often control significant amounts of assets or coordinate complicated cross-chain verification mechanisms.

The challenge comes from the fact that a cross-chain system must answer a difficult question:

How can one blockchain securely trust information originating from another blockchain?

If that verification process fails, the consequences can be severe.

Potential vulnerabilities include:

• Smart-contract exploits
• Validator compromise
• Private-key failures
• Malicious relayers
• Incorrect message verification
• Oracle manipulation
• Economic attacks
• Liquidity-provider exploits
• Governance attacks
• Replay attacks
• Poorly designed token representations

This means cross-chain liquidity cannot simply be optimized for speed and capital efficiency.

It must also be optimized for security and trust minimization.

The Liquidity Trilemma

Cross-chain infrastructure faces a difficult balancing act.

Users want:

1. Security

Funds should remain protected.

2. Capital Efficiency

Liquidity should not sit idle unnecessarily.

3. Speed

Transactions should settle quickly.

But improving one dimension can sometimes create trade-offs elsewhere.

For example, highly secure verification mechanisms may introduce additional latency.

Extremely fast systems may rely on additional assumptions.

Capital-efficient systems may require complex liquidity management.

The next generation of interoperability protocols will therefore compete not simply on the number of supported chains, but on how effectively they balance these three objectives.

The Battle for Liquidity Providers

Cross-chain infrastructure also creates a new competitive environment for liquidity providers.

Liquidity providers are the capital behind many decentralized markets.

They can earn fees by supplying assets to:

• Automated market makers
• Cross-chain pools
• Lending markets
• Liquidity networks
• Settlement systems
• Intent-based trading systems

But cross-chain liquidity introduces additional considerations.

A liquidity provider must evaluate:

• Yield
• Trading volume
• Impermanent loss
• Bridge risk
• Smart-contract risk
• Chain-specific risk
• Liquidity utilization
• Withdrawal conditions
• Token volatility

Higher yields may compensate for higher risk—but not always.

This means sophisticated liquidity providers will increasingly evaluate risk-adjusted returns, rather than simply chasing the highest advertised APY.

Cross-Chain DEX Aggregation

Decentralized exchanges are another major battleground.

Instead of searching for liquidity on a single chain, cross-chain aggregators can potentially search across multiple liquidity sources.

Consider a user wanting to exchange Asset A for Asset B.

The optimal route might involve:

Chain A → Liquidity Pool → Cross-Chain Network → Chain B → DEX

The user may not need to manually execute each step.

Routing infrastructure can compare:

• Liquidity depth
• Price impact
• Fees
• Gas costs
• Execution speed
• Available routes
• Bridge costs

The result is potentially better execution for users and more efficient utilization of fragmented liquidity.

Why Developers Care About Cross-Chain Liquidity

Cross-chain liquidity isn’t only a user problem.

It is also a developer problem.

A new DeFi application launching on a smaller blockchain may have excellent technology but insufficient liquidity.

Without enough capital, users experience:

• High slippage
• Low borrowing capacity
• Poor trading execution
• Limited market depth

Cross-chain infrastructure can potentially help applications access liquidity beyond their native ecosystem.

This creates a powerful network effect.

More liquidity attracts users.

More users create more volume.

More volume attracts liquidity providers.

More liquidity attracts more developers.

This cycle can accelerate ecosystem growth.

Cross-Chain Liquidity Could Change Blockchain Competition

For years, blockchain ecosystems competed by trying to retain users inside their own environments.

But interoperability creates a different competitive model.

Instead of asking:

“How do we keep liquidity inside our chain?”

Networks may increasingly ask:

“How do we become an attractive destination within a larger liquidity network?”

This is a significant philosophical shift.

A blockchain does not necessarily need to own all liquidity.

It may simply need to become the best place for liquidity to operate.

For example, a chain could specialize in:

• Derivatives
• Gaming
• Stablecoin payments
• Institutional settlement
• Real-world assets
• Lending
• Trading
• AI applications

Cross-chain infrastructure can then connect that specialized economy to the rest of Web3.

The Institutional Opportunity

Cross-chain liquidity could also become increasingly important as institutional capital enters blockchain markets.

If institutions eventually interact with multiple blockchain ecosystems, they will need infrastructure capable of managing liquidity across networks without requiring manual processes for every chain.

This could create demand for sophisticated cross-chain treasury and liquidity-management systems.

Instead of managing isolated wallets across dozens of networks, institutions could potentially use unified infrastructure to monitor and allocate capital across multiple blockchain environments.

Real-World Assets Add Another Layer

The growth of tokenized real-world assets could make interoperability even more important.

Tokenized:

• Treasury products
• Bonds
• Funds
• Credit instruments
• Commodities
• Real estate
• Other financial assets

may eventually exist across different blockchain environments.

If these assets become fragmented across networks, interoperability becomes essential.

Imagine a tokenized financial asset issued on one blockchain while investors use another network for trading, collateralization, or settlement.

Without efficient interoperability, the market becomes fragmented.

With strong interoperability, these assets could potentially participate in a broader digital financial ecosystem.

The Future May Be Chain-Agnostic

One of the most interesting possibilities is that users eventually stop caring which blockchain they are using.

Today, crypto users often think about:

• Which chain?
• Which wallet?
• Which bridge?
• Which DEX?
• Which gas token?
• Which network fee?

For mainstream adoption, that complexity may need to disappear.

The ideal experience could look more like traditional internet applications.

Users simply choose what they want to accomplish.

The infrastructure handles:

Chain selection → Liquidity discovery → Routing → Execution → Settlement

Behind the scenes, multiple blockchains may be involved.

But from the user’s perspective, there is simply one application.

That is the promise of chain abstraction.

Chain Abstraction: The Next Step

Chain abstraction aims to hide blockchain-specific complexity from users and applications.

Instead of forcing users to understand individual networks, applications can provide a unified experience.

This could involve:

• Unified balances
• Automated gas management
• Cross-chain transactions
• Smart routing
• Intent-based execution
• Unified liquidity
• Account abstraction
• Cross-chain messaging

If successful, chain abstraction could transform how people interact with Web3.

Users would no longer think:

“I need to bridge my assets to another chain.”

They would simply think:

“I want to trade, borrow, pay, invest, or transfer.”

The underlying infrastructure would handle the complexity.

What Will Determine the Winners?

The race for cross-chain liquidity will likely not be won by the project supporting the largest number of chains alone.

Several factors will matter.

Security

A cross-chain system managing billions in liquidity must have robust security assumptions.

Capital Efficiency

Idle liquidity is expensive.

The best systems will find ways to maximize the productive use of capital.

Execution Quality

Users care about the final result: price, fees, speed, and reliability.

Liquidity Depth

Deep liquidity reduces slippage and improves execution.

Developer Experience

Infrastructure needs to be easy for applications to integrate.

Composability

Cross-chain systems should allow applications to interact with other protocols rather than operating as isolated services.

Decentralization

Users and institutions may increasingly demand systems that reduce dependence on centralized intermediaries.

Scalability

As more chains and applications connect, interoperability infrastructure must handle increasing transaction and messaging volumes.

The New Competitive Moat: Liquidity Connectivity

In traditional finance, liquidity is a competitive advantage.

The same principle applies to DeFi.

But in a multi-chain environment, simply possessing liquidity may not be enough.

The more important advantage may be liquidity connectivity.

A protocol with access to multiple liquidity sources can potentially offer:

• Better execution
• More trading pairs
• Greater capital efficiency
• More opportunities
• Lower slippage
• Better user experiences

This creates a new kind of network effect.

The more chains connected to a liquidity network, the more valuable that network can become.

And the more users and applications use it, the more attractive it becomes to liquidity providers.

The emerging cross-chain economy could create a powerful flywheel:

More Chains Connected

↓

More Liquidity Available

↓

Better Execution

↓

More Users

↓

More Transaction Volume

↓

More Fees and Opportunities

↓

More Liquidity Providers

↓

Even Deeper Liquidity

This flywheel could become one of the defining economic mechanisms of the next generation of DeFi infrastructure.

What Could Go Wrong?

Despite the enormous potential, cross-chain liquidity is not guaranteed to become a seamless global system.

Several challenges remain.

Fragmented Standards

Different chains may use different architectures, messaging systems, and security models.

Security Failures

One major exploit could undermine confidence in an interoperability network.

Liquidity Fragmentation

Ironically, adding more interoperability systems could create even more fragmentation.

Economic Attacks

Protocols must defend against attackers exploiting incentives rather than traditional software vulnerabilities.

Regulatory Uncertainty

Cross-border digital asset movement may attract increasing regulatory attention.

Complexity

Even if infrastructure becomes sophisticated, poor user interfaces could keep cross-chain applications difficult to use.

The industry therefore needs to solve not only the technical problem of interoperability, but also the economic, security, governance, and user-experience problems surrounding it.

The Bigger Picture

The race for cross-chain liquidity is ultimately about something bigger than bridges.

It is about whether blockchain networks remain isolated economies or evolve into an interconnected financial system.

If interoperability succeeds, liquidity could become increasingly mobile.

Capital could move toward the applications, markets, and opportunities offering the best combination of risk and return.

Developers could build applications without worrying that their users are trapped on a single chain.

Liquidity providers could access markets across multiple ecosystems.

Institutions could manage blockchain-based assets through unified infrastructure.

And users could interact with Web3 without needing to understand every technical layer underneath the application.

Conclusion: Liquidity Wants to Move

Blockchain ecosystems are no longer competing in isolation.

Ethereum, Layer-2 networks, Solana, and other chains are increasingly becoming pieces of a much larger digital economy.

The next stage of DeFi may therefore be defined not by how much liquidity a chain can attract, but by how efficiently that liquidity can connect to the rest of the ecosystem.

The winners of this race will likely be the networks and infrastructure providers that can combine:

Security + Liquidity + Speed + Capital Efficiency + Interoperability + User Simplicity.

Cross-chain liquidity could ultimately transform blockchain from a collection of separate financial networks into a connected global liquidity layer.

And when that happens, the most valuable blockchain may not be the one that keeps liquidity trapped inside its walls.

It may be the one that makes liquidity flow everywhere.

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Only 281 of 1,343 crypto service providers operating across the European Economic Area have secured MiCA authorization after the EU’s final transition period expired on July 1, leaving more than 1,000 firms without approval under the bloc’s licensing regime.

According to blockchain intelligence firm TRM Labs, 1,062 firms in its dataset had not obtained authorization under the Markets in Crypto-Assets Regulation by the deadline and must now leave the market, restructure their operations or transfer customers to an authorized provider.

The gap extends beyond licensing. TRM found that 12% of firms without authorization carry a High or Severe risk rating, compared with 2% of authorized providers, while every firm assigned a Severe rating belonged to the unauthorized group.

Most providers in both groups have little direct contact with illicit funds. However, TRM identified a small number of unauthorized firms sending between 1% and 12% of their volume directly to illicit addresses. No authorized provider recorded direct illicit exposure above 1%.

MiCA authorization has left more than 1,000 firms outside the regime

Before MiCA, crypto companies operated under separate registration or licensing systems maintained by individual European countries, creating major differences in the requirements firms faced depending on where they registered.

TRM identified 383 operating firms under Lithuania’s previous registration system and 241 in Poland. Poland’s official register contained more than 1,800 entries, although the blockchain intelligence firm said most showed no observable crypto activity.

At the other end, Slovenia had three identified providers and Belgium had two. TRM cautioned that its figures track firms it could identify as actually providing crypto services rather than every entry on national registers, meaning countries without public registers may be undercounted.

MiCA replaced the national systems with a common authorization framework. Companies legally operating before Dec. 30, 2024, could continue under Article 143(3) while seeking authorization during the transition period, with July 1 serving as the final EU-wide cutoff.

As crypto.news explained shortly before the deadline, individual member states were allowed to set shorter transition periods, but none could extend the grandfathering system beyond July 1. Firms without the required authorization after their applicable deadline could no longer legally provide covered crypto services in the EU.

Licensing numbers had already shown how much the market could contract. In May, the ESMA register contained 204 authorized CASPs, including 51 approved during the first five months of 2026. Germany accounted for 55 at the time, followed by the Netherlands with 25 and France with 17.

A separate June report found that more than 3,000 crypto firms had been registered across Europe before MiCA, while only 194 had secured authorization by May. Hogan Lovells estimated at the time that roughly 75% of firms registered under the previous systems could lose their status as national transition periods expired.

Germany and smaller EU states have taken more firms through MiCA

Authorization has been uneven across individual European jurisdictions, according to TRM’s July 1 dataset.

Germany authorized 55 firms, while France and the Netherlands each authorized 29. Malta approved 20 and Cyprus 19, compared with nine home authorizations issued by Italy despite 145 firms operating there.

Malta, Cyprus, Ireland and Luxembourg together accounted for 63 of 272 home authorizations identified by TRM, even though only 101 operating firms came from their previous registers.

Lithuania produced a very different conversion rate. Eight firms obtained authorization from a previous register containing more than 400 providers, while Poland issued none despite its old register exceeding 1,800 entries. Greece and Portugal also issued no home authorizations in TRM’s dataset.

The figures also show how MiCA’s passporting system can separate where a provider operates from which regulator supervises it. Germany’s BaFin authorized 55 of the 57 licensed providers operating in the country, while Italy hosted 37 licensed firms but issued nine home authorizations. Spain hosted 34 and authorized 12.

Under MiCA, a CASP approved in one member state can use passporting rights to provide covered services elsewhere in the bloc. For example, B2C2 secured Luxembourg authorization in May, allowing the liquidity provider to offer regulated over-the-counter spot crypto trading across all 27 EU member states and three additional EEA markets.

The same system has allowed firms including Coinbase, Bitpanda and Kraken to operate from different regulatory bases while serving customers across multiple European markets.

By July 3, ESMA’s interim register had expanded to 300 authorized crypto-asset service providers after 57 additional firms were added around the July 1 deadline, including Standard Chartered and FalconX.

Unauthorized firms carry higher risk ratings and sanctions exposure

Looking beyond license numbers, TRM found a clear difference in the risk profiles of the two groups.

About 12% of unauthorized firms received a High or Severe rating, six times the 2% recorded among authorized providers. Severe ratings were found exclusively among firms that failed to obtain authorization.

Direct exposure to illicit or high-risk counterparties was much closer when measured across each group as a whole. Unauthorized providers recorded 0.09% of outgoing volume directly involving such counterparties, compared with 0.07% among licensed firms.

High-risk exchanges and gambling services accounted for the largest exposures. Unauthorized firms sent $19 billion to high-risk exchanges and $15.3 billion to gambling services, while authorized providers recorded $14.2 billion and $13.4 billion, respectively.

Sanctions exposure produced a larger difference. TRM calculated that unauthorized firms sent $5 billion directly to sanctioned counterparties, roughly three times the $1.7 billion recorded among authorized firms.

Risk within the unauthorized group was heavily concentrated. Half of the firms showed no measurable direct illicit exposure, while a limited number sent between 1% and 12% of their volume directly to illicit addresses. TRM calculated that direct illicit exposure among the offboarding firms was about four times higher because of those outliers.

The unauthorized cohort also included HTX, which TRM described as a designated exchange, and Huione Pay, which has been named under U.S. special measures. Entities affected by EU measures restricting dealings connected to Russia were also among firms that held national registrations but did not obtain MiCA authorization.

The composition of the two groups differed as well. Exchanges accounted for 42% of unauthorized providers compared with 29% of authorized firms, while payment companies represented 16% and 9%, respectively.

Financial and investment service providers were more common among authorized CASPs, making up 25% and 21% of the group, compared with 9% and 7% among unauthorized firms. TRM’s High-Risk Exchange category appeared only among providers that did not obtain authorization.

Customer transfers are creating a new supervisory test

With more than 1,000 firms outside the authorization regime, the EU’s Anti-Money Laundering Authority has focused on what happens when their customers and assets move elsewhere.

AMLA said the end of the transition period would cause unauthorized virtual asset service providers to leave the market, customer relationships to be transferred or terminated, and crypto activity to become concentrated among fewer authorized CASPs.

During wind-downs, compressed exit schedules can place pressure on anti-money laundering controls and make it harder to track where customers and funds move, according to the authority. Receiving CASPs can simultaneously face changes in their customer risk profiles and additional demands on transaction monitoring systems.

AMLA has therefore asked supervisors to prioritize oversight of exit plans and customer transfers while coordinating with regulators in other jurisdictions when customers move across borders.

TRM identified 30 unauthorized providers with High or Severe risk ratings, giving receiving firms and supervisors a group that can be screened before customer migrations take place.

The firm also cautioned against treating all customers leaving unauthorized providers as equally risky. Most firms that failed to secure authorization still carried Low risk ratings and recorded negligible direct illicit exposure.

For receiving CASPs, TRM said entity-level screening can distinguish customers arriving from a Low-rated payment provider with little illicit exposure from those leaving a Severe-rated entity where a measurable share of transaction volume has moved directly to illicit addresses.

Regulators have also started examining authorized providers after completing much of the initial licensing work. In July, ESMA launched a review of a sample of MiCA-authorized crypto custodians, examining areas including custody controls, private-key management, incident response and risks tied to third-party providers.

TRM separately examined whether regulators issuing more licenses were also supervising firms with higher illicit exposure. Across 23 jurisdictions where licensed providers carried measurable transaction volume, it found no identified correlation between the number of authorizations issued and the illicit exposure of firms supervised there.

For financial institutions assessing counterparties, TRM said the number of CASP licenses granted by a firm’s home jurisdiction therefore provides little information about the individual provider’s risk. Its analysis instead found the differences at entity level, including individual risk ratings and direct exposure to illicit, sanctioned and other high-risk counterparties.