Crypto Market Structure and Liquidity: Why Prices Move the Way They Do
Introduction
Price action is the result of structure and liquidity—not randomness.
Understanding market structure explains why prices move, not just that they move.
CEXs vs DEXs
Order books dominate centralized exchanges; AMMs dominate decentralized ones.
Each creates different liquidity behavior and risk.
Order Books and Price Discovery
In order-book markets, price emerges from continuous bidding and offering.
Deeper liquidity generally means more stable prices.
AMMs and Liquidity Pools
AMMs allow permissionless trading but introduce slippage and impermanent loss.
Market Makers and Arbitrage
Market makers provide depth; arbitrage keeps prices aligned across venues.
How Derivatives Influence Spot Markets
Perpetual futures and leverage often dominate short-term price discovery.
Conclusion
Traders who understand structure focus on liquidity flows—not just candles.