A measure of how easily the largest cryptocurrency can be bought or sold has dropped to a 10-month low, according to Conor Ryder at Kyoko, who added bids and market maker orders 2% of the price on either side. asked within range. Books. The liquidity dropoff is being caused by firms losing access to dollar-payment systems that buy and sell crypto.
“Liquidity on US exchanges and especially USD pairs has been hardest hit due to banking fears,” Ryder said. Not only the downside but the upside is less support.”
Liquidity has fluctuated as Silvergate Capital Corp and Signature Bank, which had deep ties to the crypto industry, have closed in recent weeks, with market watchers watching for any additional downside or turbulence. Many digital-asset firms banked with those lenders, while exchanges relied on their services for real-time payments, among other things.
“We can expect more volatility in the short term until we get an injection of liquidity,” Ryder said.
All this is happening because crypto prices are skyrocketing. Bitcoin has gained nearly 70% this year, while other coins have also risen. Analysts say the turmoil in the financial sector has pushed investors toward digital tokens, which proponents claim are separate and distinct from whatever turmoil is plaguing US and European banks.
It’s an old narrative around bitcoin that has made a comeback in recent weeks, though not everyone is convinced that it’s the main reason the crypto is rallying.
“Bitcoin surges against a backdrop of bank collapse and contagion fears,” Torbjørn Bull Jenssen, Bendik Schei and Anders Helseth of K33 wrote in a note this week. However, all three said it is unclear whether the coin is functioning as a safe. haven asset or “reacting to expectations of potentially lower interest rates.”
Still, he said, bitcoin continues to move like a high-beta risk asset — even as the Nasdaq 100 has rallied in recent weeks, for example. “Bitcoin, on the other hand, has strongly outperformed the Nasdaq, gaining market share relative to high-risk crypto assets, and rising together with gold, which is considered a classical safe haven asset,” they wrote.
Crypto trading volume plummeted in the wake of the FTX implosion as investors feared a market retreat from one of the industry’s previously respected companies. Trading volumes have improved this year due to the increase in prices, although they are nowhere near the previous record levels.
But the crypto market may also be prone to greater volatility because ownership of coins tends to be uber-concentrated among a relatively small number of investors, says Aophin Davitt, CIO at Moneta.
“Ownership is more concentrated there, so when you don’t have broad-based ownership, you can get more volatility,” he said. increased instability.
