Liquidity crisis in cryptocurrencies

I've written a book about the history of the US financial system and the tendency towards liquidity crisis called "the Dialectics of Liquidity Crisis: an interpretation of explanations of the crisis of 2007-08".

The downturn that is occurring today looks to me like a good old fashioned liquidity crisis occurring in a new space.

It's always tempting to try to rationalise the causes of a downturn by finding reasons for them. There does seem to be a confluence of a few things happening such as the extension of Anti-money laundering regulation to the exchanges particularly in Korea and the giant $530M hack of the Japanese exchange Coincheck.

The truth is that crises by their nature are self-sustaining once they get going.

The root of crises is often found in a flaw in the 'form of value' that has always been present but not operative until a particular set of facilitative circumstances invokes it causing the system to experience crisis.

Money isn't just a simple token of exchange but is often constructed by increasingly technical and abstract techniques combined with a supportive institutional architecture (approved legally enforceable collateral, banks, central banks and government treasuries).

I just tried to do my bit to stem the bleeding and buy some ethereum but my exchange informed me that there was a backlog of 200,000 transactions on Bitcoin so transactions were taking a long time. This information didn't directly relate to my purchase of ethereum but was interesting nonetheless.

I'm new to crypto but my question is whether Bitcoin is so illiquid because of transaction times that people who want to sell to get out of Bitcoin and stem their losses can't so they are selling all their alt-coins which are slightly more liquid?

There is no way to know if this is accurate without doing forensics of how the exchanges have been operating over the next couple of months. But it does illustrate that the exchanges and the market for crypto are not currently set up to deal with liquidity crisis. They are already having trouble scaling up to clear applications, verifications and transaction and are illiquid in that regard. Bitcoin may have reached it's used by date as crypto 'reserve currency' because of transaction times and their is no market maker available to make a market when the price dives.

All these factors together mean that crypto may have a tendency to liquidity crisis in the near future.

I'm not sure if I'm right yet that crypto is subject to liquidity crisis but I think it's a valuable hypothesis to keep in mind because the space will continue to be volatile until it is reshaped to facilitate more liquidity that will enable it to be a more dependable stable form of value.

additional references
https://www.businessinsider.com.au/bitcoin-cryptocurrency-goldman-barrier-institutional-investors-2018-2
https://techcrunch.com/2018/01/15/researchers-finds-that-one-person-likely-drove-bitcoin-from-150-to-1000/