Thanks, Binance: Crypto Liquidity Shows Signs of Recovery

Over the past week, market depth has experienced a slight recovery, with the total quantity of bitcoin within 2% of the mid price

article-image

Blockworks Exclusive art by axel rangel

share

The so-called “Alameda Gap” in crypto liquidity on centralized exchanges shows early signs of letting up, thanks to Binance, according to new research from Kaiko. 

A steep drop in crypto market depth occurred earlier this month when Alameda Research, the hedge fund arm of Sam Bankman-Fried’s since-collapsed FTX, ceased trading operations. Other market makers followed suit, plunging liquidity to low levels not seen since early June, Kaiko noted in a report Monday. 

“Thankfully, over the past week depth has experienced a slight recovery, with the total quantity of BTC within 2% of the mid price increasing from 6.8k to 9.1k,” Kaiko analysts wrote. “In dollar terms, market depth has increased from $112 [million] to $150 [million], which suggests market makers are slowly redeploying capital across exchanges.”

Bid-ask spreads show that market makers on some exchanges are still wary of volatility; spreads for BTC-USD pairs “on most exchanges have not yet recovered,” analysts noted. 

The slight rebound in liquidity levels may not last long, analysts warn. Last week’s bankruptcy filings revealed FTX owes its 50 biggest creditors a combined $3 billion. Japanese crypto exchange Liquid, which FTX acquired in March, suspended all trading and withdrawals over the weekend, suggesting further contagion. 

Genesis suspended withdrawals last week, fueling rumors of a possible bankruptcy filing from parent company Digital Currency Group. The news has traders alarmed. 

“Trade volumes on top centralized exchanges more than halved from the week prior, falling to $100 [billion] as traders pulled out from the market,” researchers noted. “Huobi and Bitfinex registered the largest average weekly declines of 82% and 75%, respectively.” 

The weekly trading volumes on Binance remained firmly above $80 billion over the past few months, likely due to its aggressive fee reduction, analysts added.

Decentralized exchange tokens are down 16%, Kaiko researchers noted, performing slightly better than bitcoin. 

“Notably, the token of decentralized derivatives exchange dYdX surged by 18%, suggesting that competition on derivative markets for the gap left by FTX is heating up,” analysts wrote. “DeFi projects were also strongly impacted by the risk-off shift in sentiment and are down 25%.”


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

MON - WED, MARCH 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience:  Attend expert-led panel discussions and fireside chats  Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts   Grow your network […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

logo.jpeg

Research

Akash is a general-purpose compute platform with GPUs, storage, LLM training or inference, and validator hosting through its two-sided marketplace.

article-image

The SEC could allow half a dozen or more such funds to launch at once, Ark Invest CEO says

article-image

2023 saw a decline in a16z crypto funding, but the behemoth VC firm teased what it’s excited for next year

article-image

“Iran Unchained” launched a new version of its grant platform to make donations to activists easier

article-image

The stablecoin marks the first time a regulated European bank has made a euro-pegged stablecoin available on a crypto exchange

article-image

Build it and they will come, perhaps, but making crypto easier to use is turning out to be just as important

article-image

Amid moves by Itau Unibanco and Nubank, the country could serve as “a proof of concept” for TradFi-crypto integrations, industry research exec says