How much of the SM problem is our own doing?

Well it is a problem for me. I am a small investor and I have set myself a total limit of £5000 to invest in SS. All of my loans are £100 or less. I tried to sell some of my older loans to fund the newer ones but gave up and cancelled the sales as I was losing too much interest.

For me, the SM has gone from one extreme to the other. The liquidity has ground to a halt and has stopped me from buying the newer loans.  

I'm a big fan of free markets but the problem is more nuanced than that. FS allow differential pricing and their market is clogged. My view is that people prefer the simplicity of selling at par and SS should keep things as they are.

Releasing The Nine in one lump was folly. Following up with another one today was stupidity.
I would like to have seen maybe three at a time, with s few days between each sale.
We've all sat there, wanting to invest and seeing nothing but a couple of loans which are either negative or with only z fee days.
We've all moaned when the loans are gone quicker than we can identify grass etc.
However, thud huge pile, however gloomy it looks, will go down eventually.

Oh, I accept that. However, I still think SS should have seen what would happen

I think there is one thing that people are ignoring. A couple of weeks ago SS changed its rule on loan funding, in that you could not sell a loan part for 7 days, unless it was fully funded. This was to stop the 'abuse' of people (freeloaders) buying loans, selling them 2 days later and pocketing the interest. This must have been a 'significant' issue for SS to introduce the rule. It is my belief that there were numerous people doing this, possibly in consortiums selling loans between them, which is why the SM was so liquid, and why everyone was complaining about the speed at which loans on the SM were selling. This could also account for the lower percentages allocated in pipeline loans. Think about it, a group of people not funding a million in loans would give them a nice little earner of around 120k. Beats working in McDonalds.

At around the same time one loan went into default, which started the sale of that loan, along with other short dated loans. At that point the SM started to build, particularly on short dated loans, and has continued to build, then really built once status 3 loans of around 15 million were placed on the SM. Once people were seeing loans were not selling that quickly increased the build up of loans. I also think that pipeline loans will be coming onto the SM as they cannot be funded due to older loan parts not being sold which add further to the total.

I am a new investor of 2 months and as it is my intention to invest heavily I have been trying to study what is going on so I can develop my own strategy for investing.   

I think the SM will not return to the same liquidity as it was before for older loans, as the freeloaders have been removed, but more desirable loans will be sold quickly. Once this set of loans has been put back on the SM for default I think people may have re-evaluate their investing strategy.

I, for one, will still be investing in SS; and once they implement the IFISA considerably more will be winging it's way in.