Cycles Pioneers Sustainable Crypto Credit Solutions Post-2022 Liquidity Crisis
The cryptocurrency market continues to feel the effects of the 2022 liquidity crisis, particularly in unsecured credit markets. Major lenders including BlockFi, Celsius, Voyager, and FTX collapsed during this period. In response, Cycles, a privacy-focused clearing protocol, is developing infrastructure to rebuild sustainable crypto credit markets with improved risk management.
Cycles Prime: A New Approach to Credit Clearing
In May, Cycles launched Cycles Prime, a pilot decentralized clearing system. This innovative solution allows institutional crypto trading firms to settle payments without collateral requirements or escrow services. The platform specifically targets firms seeking to reduce counterparty risk while maintaining operational efficiency.
Market Conditions and Recovery Challenges
Ethan Buchman, CEO of Cycles, explained to Cointelegraph how credit markets have fundamentally changed since 2022. “Unsecured credit conditions tightened dramatically,” Buchman noted. “Transactions that previously relied on credit now typically require collateral or prefunding.” The crisis drained liquidity from many ecosystems, causing prolonged declines in token values and DeFi activity. While some projects recovered by 2024-2025, others continue to struggle. USDC, for example, only regained its 2022 market capitalization earlier this year.
Rethinking Credit Models for Crypto Markets
Buchman challenged the industry’s tendency to mimic traditional finance solutions. Instead of relying on large balance sheets from TradFi institutions, he advocates for a “network-aware clearing approach.” This method prioritizes robust risk management frameworks at the protocol level, enabling more efficient capital use and liquidity preservation during market stress.
Industry Experts Weigh In on Liquidity Challenges
Arthur Azizov of B2 Ventures describes crypto’s liquidity issues as a “silent structural risk,” citing the 2022 market collapse as evidence of a “liquidity illusion.” These concerns resurfaced in April 2025 when Mantra’s OM token plummeted 90%. Bitget CEO Gracy Chen called this event a clear demonstration of the sector’s ongoing liquidity vulnerabilities.
