Bloomberg: The long-term lack of liquidity in the crypto market has led to recent sharp fluctuations in Bitcoin prices

Odaily News The long-term lack of liquidity in the cryptocurrency market is a key reason why Bitcoin prices have fluctuated by more than 10% in recent weeks. FalconX’s research team found that while the recent resurgence in trading activity was partly due to anticipated stimulus for Bitcoin exchange-traded funds (ETFs), market depth remains at its lowest point this year (they found by looking at 24 hours of Bitcoin trading activity Market depth is measured by average trading volume (within 1% of the current price). In November last year, blockchain data company Kaiko dubbed the overall decline in liquidity the “Alameda Gap.” Researchers at Kaiko say that this lingering effect is largely the result of the huge losses suffered by market makers after the FTX collapse. In the spot market, total CEX and DEX trading volumes are at multi-year lows, according to Delphi Digital data. The market capitalization of stablecoins is another measure used by analysts to gauge the health of market liquidity, as stablecoins are used as a key entry and exit route for cryptocurrency traders. They are usually pegged to another currency, most commonly the U.S. dollar. According to DeFiLlama data, the total market capitalization of stablecoins has been shrinking. Delphi Digital analyst Michael Rinko said: “The fundamental reason why liquidity continues to flow out of the cryptocurrency market rather than into the cryptocurrency market is high interest rates.” (Bloomberg)