Market maker Wintermute warns that apparent growth in crypto liquidity may be misleading due to "recycled liquidity" — assets being traded within the same ecosystem without fresh external inflows. This practice can inflate volumes and mask true demand.Recycled liquidity can distort price discovery and increase volatility, creating hidden risks for investors and traders who rely on accurate market data.Wintermute's alert highlights the need for greater transparency and regulatory oversight to ensure trading volumes reflect genuine market activity and to reduce potential manipulation.While the crypto market remains resilient, addressing recycled liquidity and improving market integrity are key steps toward long-term stability and increased institutional confidence.