From 2022 Crypto Bear Market Still echoing throughout the industry, unsecured credit conditions did not fully recover from the panic collapse, sweeping over lenders like Blockfi, Celsius, Voyager, and ultimately FTX.
Three years later, the privacy-protected clearance protocol cycle attempts to build a foundation for sustainable credit markets.
In May, the company launched a pilot version of the pilot version Prime, which is like a decentralized liquidation house, allowing cryptocurrency trading companies to net and clear outstanding payments without collateral or custody. The pilot is reserved for cryptocurrency trading companies that want to reduce credit usage without a central rival.
“The unsecured credit conditions have been tightened significantly since 2022”, said Ethan Buchman, CEO of Bicycle, in an interview with Cointelegraph, and “the business that was previously conducted in credit is increasingly required for collateral or pre-funding.”
“The 2022 crisis has weakened liquidity in many ecosystems and has resulted in a sustained decline in many tokens and Defi volumes,” Buchman said. “While some major projects have recovered significantly by 2024/2025, some others have not, but we have seen that, for example, USDC has only recovered the high-quantile ceiling in 2022 history earlier this year.”
He said that like traditional finance, the cryptocurrency industry has become “more aware of unsecured credit risks”, which makes it harder to make the credit economy grow more.
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Encryption cannot rely on the tradfi model
Although many in the industry have achieved similarities between cryptocurrencies and Tradfi, especially more Traditional financial assets mobile OnChainBuchman stressed that cryptocurrencies cannot draw all the clues from tradition.
“Many in cryptocurrencies believe that the only way we can restore the credit economy is to recruit large balance sheets from Tradfi, which can be more risky. This is Tradfi’s general approach, fixed in a central bank, which prints funds to buy securities during times of crisis.”
According to Buchman, a better way forward is to “a way to clear network perception.”
“The growth of sustainable credit markets depends on the risk management and cleanup foundation at the core of the system, achieving greater capital efficiency and liquidity savings, especially during stressful times.”
He believes that “liquidity is fundamentally a problem of network topology.”
Others in the industry also pointed out Encrypted liquidity issues. B2 Ventures founder Arthur Azizov called it a “silent structural risk” and used the 2022 cryptocurrency downturn as an example of the market’s “liquidity hallucination”.
The problem surfaced in 2025, most notably 90% of the OM token of the spell crashes In April. Bitget CEO Gracy Chen said the crash exposed the industry’s “critical” liquidity issues.
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