When Liquidity, Custody, and Control Diverge
Liquidity, custody, and market structure are often discussed independently.
In practice, they are inseparable.
Liquidity determines whether an action is possible.
Custody determines who can act.
Market structure determines how stress propagates.
During periods of abundant liquidity, these distinctions appear academic.
Assets move freely. Access feels universal. Risk appears distributed.
During contraction, alignment breaks.
Custodial layers that seemed neutral become chokepoints.
Liquidity pools fragment.
Market participants discover that ownership does not guarantee access.
Exchange flows during these periods are not expressions of intent.
They are expressions of constraint.
What appears as panic is often forced behavior:
– collateral calls
– access constraints
– structural unwind
The critical insight is this:
Risk is not evenly distributed across balance sheets.
It is concentrated where custody, liquidity, and incentives intersect.
This is why failures feel sudden.
The structure was fragile long before it broke.
Understanding systems requires tracing control, not headlines.
This analysis prioritizes structure over narrative.
