Depth Fragmentation

Depth Fragmentation refers to the distribution of liquidity across multiple disparate trading venues, making it difficult to execute large orders without significant slippage. In the cryptocurrency ecosystem, liquidity is often split between various centralized exchanges and decentralized protocols, preventing the formation of a unified global order book.

This fragmentation increases the complexity of order routing and can lead to price discrepancies across platforms. Arbitrageurs work to bridge these gaps, but the underlying structural fragmentation remains a persistent challenge for market efficiency.

Solving this requires advancements in interoperability and aggregated liquidity solutions that can consolidate market depth for the benefit of all participants.