Bitcoin ( BTC) and Ethereum ( ETH) liquidity conditionssince the Terra collapse in May 2022 -most low levelexists.
bitcoinAnd Ethereum The liquidity conditions in the markets continue to deteriorate and the situation is now more worrying than it was three months ago. This causes investors to worry about sudden price fluctuations in the crypto market.
BTC Market Depth at Lowest Since May 2022
Liquidity refers to the market’s ability to meet large buy and sell orders at stable prices. The metric commonly used to evaluate liquidity conditions is 2 percent of market depth. The more important the depth, the more liquid an asset is said to be.
Paris-based crypto data provider from kaikoThe data received is collected from 15 centralized exchanges of Bitcoin. USDT2 percent market depth for pairs, FTX bankruptcy6,800, the lowest level since May 2022, surpassing the post-mortem low to BTC It shows falling. This is the highest level in October. 15,000 from BTCa significantly low level. EthereumThe 2% market depth has halved since October, led by Binance. 57,000 to ETHreached.
Astronaut Capital Chief Investment Officer commenting on the subject Matthew dibb“Low liquidity means tougher moves, especially in alternative cryptocurrencies,” he said.
dibb: “Funds attempting to trade in size, over longer periods of time to TWAPforced, therefore STXThis is why some charts, such as
TWAP is an algorithmic strategy that focuses on obtaining an execution price close to the time-weighted average price of the asset. In other words, it is a strategy for dividing a large order into smaller quantities and minimizing their impact on the market and reducing slippage.
The slippage is the difference between the expected price for a trade and the actual price at which the trade is executed. Slippage usually occurs in situations of low market liquidity or high volatility.
Commenting on this situation Matthew dibb“Decreased market depth means that most major funds are not staying at the same level as before due to the amount of slip involved,” he said.
The latest drop in market depth coincided with expectations of diminishing volatility in the Bitcoin market. According to Griffin Ardern, an investor in crypto asset management firm Blofin, this type of situation often leads to a sudden burst of volatility.
CryptoComparemeasures expected volatility over the next 30 days, according to the data source bitcoin Volatility index(BVIN), the lowest level since at least the beginning of 2021 56.39to fell.
According to data tracked by Amberdata, of bitcoin The difference between the seven-day expected volatility and the seven-day realized volatility turned negative. Short-term volatility indicates that expectations are underpriced.
Ardern : “An environment conducive to high volatility is created and as the depth is low, only a small amount of buy/sell orders is sufficient to affect the price. As a result, the hedging activity of market makers increases market volatility.”
Market makers always take the opposite side of investors’ trades, and as the price fluctuates, they buy and sell the underlying asset from the market. independentOne portfolio they continue. Hedging activities are known to affect the spot market price of Bitcoin and could have a huge impact this time around due to the low market depth.
Crypto market liquidity, Alameda researchAnd of FTX It began to decline after it went bankrupt in November. Alameda was one of the leading market makers providing billions of dollars of liquidity to small and large volume tokens. The company’s bankruptcyIt has crashed many trading activities, including arbitrage and high-frequency trading firms, and hurt leading market makers like Genesis.
