Cycles Eyes Sustainable Crypto Credit After 2022 Liquidity Crisis

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Ah, the crypto cosmos! A realm where fortunes are made and lost faster than you can say “blockchain.” The echoes of the 2022 bear market still dance like phantoms in the minds of traders, with unsecured credit conditions resembling a ghost town after a panic-stricken stampede. Lenders like BlockFi, Celsius, Voyager, and the infamous FTX have left behind a trail of bewilderment and regret, much like a bad hangover after a night of excess. 🍾

Fast forward three years, and here comes Cycles, a privacy-preserving clearing protocol, strutting onto the scene like a peacock in a tuxedo, attempting to lay the groundwork for a sustainable credit market. It’s as if they’re saying, “Fear not, dear traders, for we shall rise from the ashes of liquidity crises!”

In May, Cycles unveiled its pilot version of Cycles Prime, a decentralized clearing house that allows crypto trading firms to net and clear outstanding payments without the burdensome shackles of collateral or escrow. It’s like a buffet where you can eat all you want without paying upfront—if only life were that simple! This pilot is exclusively for institutional crypto trading firms, those brave souls looking to reduce their credit usage without the meddling of central counterparties.

In a tĂȘte-Ă -tĂȘte with CryptoMoon, Cycles CEO Ethan Buchman lamented, “Unsecured credit conditions have tightened substantially” since the dark days of 2022. It seems that the days of carefree credit are over, replaced by a new era where collateral and pre-funding are the new buzzwords. Who knew finance could be so… responsible? 😏

“The 2022 crisis drained liquidity from many ecosystems, leading to a prolonged decline of tokens and DeFi volumes,” Buchman mused, as if reminiscing about a lost love. “While some major projects have bounced back by 2024/2025, others remain in the shadows, like USDC, which only recently reclaimed its 2022 all-time high market cap.”

Much like a cautious parent, the crypto industry has become “much more conscious of unsecured credit risk,” Buchman noted, making it increasingly difficult to revive the credit economy. It’s a tough love situation, really.

Crypto Can’t Rely on TradFi Models for Everything

While many in the industry have drawn parallels between crypto and traditional finance (TradFi), especially as more traditional assets waltz onto the blockchain, Buchman insists that crypto must not be a mere echo of tradition.

“Many in crypto believe that the only way to rejuvenate the credit economy is to recruit the hefty balance sheets of TradFi, which can warehouse more risk. This is the typical TradFi approach, anchored in a central bank that prints money like it’s confetti during a parade,” he quipped.

According to Buchman, the better path forward is a “network-aware approach to clearing.” It’s like saying, “Let’s not put all our eggs in one basket, especially if that basket is made of flimsy material.”

“The growth of sustainable credit markets depends on sound foundations of risk management and clearing at the heart of the system, enabling greater capital efficiency and liquidity-saving, especially in times of stress.”

In his view, “liquidity is fundamentally a problem of network topology.” Who knew topology could be so thrilling? 📈

Others in the industry have echoed these sentiments, with B2 Ventures founder Arthur Azizov labeling it a “silent structural risk,” referencing the 2022 downturn as a prime example of the market’s “liquidity illusion.”

The issue resurfaced in 2025, most notably with the 90% collapse of Mantra’s OM token in April. Bitget CEO Gracy Chen remarked that the crash exposed “critical” liquidity issues in the industry. It’s like watching a slow-motion train wreck—fascinating yet horrifying.

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2025-06-17 21:23