Crypto Market Liquidity Becomes Exhausted After FTX Crash

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2022-11-25 14:33:47

Cryptocurrency market liquidity became depleted after the crash of FTX.

The crisis that FTX created after filing for bankruptcy created a liquidity gap in the market.

Quoting the report from Kaiko:

“Cryptocurrency liquidity is dominated by a handful of exchanges, including Wintermute, Amber Group, B2C2, Genesis, Cumberland, and Alameda. The departure of one of the biggest market makers has resulted in a significant drop in liquidity, what we will call the Alameda void.”

Bitcoin market depth – the market’s ability to absorb large orders over a specific period of time – has also plummeted. Kraken’s order book is down 57% while Binance and Coinbase are down 25% and 18% respectively.

Depth of Bitcoin supply plummets

Since November 5, the day CoinDesk announced its investigation of Alameda’s balance sheet, BTC liquidity in the 2% range of the average price has dropped from 11.8k BTC to just 7 thousand, the lowest level since early June.

The ETH market was also affected by the fall, with market depth of 2% dropping to late-May levels. As for Solana alone, the market depth has decreased by 50% from 1 million SOL to less than 500,000 on every exchange.

Over the past week the index has recovered slightly, with the total amount of BTC in the 2% range of the average price rising from 6,800 BTC to 9,100 BTC ~ the momentum from $112 million to $150 million. This shows that market makers are gradually reallocating capital across exchanges as the bad news fades away.

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