• The Bitcoin (BTC) and Ethereum (ETH) industries have a combined crypto market dominance of approximately 61 percent.
• Market analysts closely monitor the liquidity of the top two digital assets to understand how well the industry is performing.
• A significant drop in Bitcoin and Ethereum’s liquidity has caused crypto whales to struggle to trade large volumes, leading to increased volatility in the altcoin market.
Crypto Market Liquidity Dwindling
The Bitcoin (BTC) and Ethereum (ETH) industries have a combined crypto market dominance of approximately 61 percent, making it important for market analysts to closely monitor the liquidity of these two digital assets to understand how well the industry is performing. Unfortunately, there has been a significant drop in Bitcoin and Ethereum’s liquidity, causing crypto whales to struggle to trade large volumes and significantly impacting altcoin trading as well.
Fall of Alameda Research Contributes To Liquidity Crunch
The fall of Alameda Research, a sister crypto firm to the FTX exchange, has contributed significantly towards the current liquidity crunch that many traders are facing. The commonly used metric for assessing cryptocurrency liquidity conditions is 2 percent of market depth – a collection of buy and sell offers within 2 percent of the mid-price or the average price between bid and ask/offer prices. According to aggregate data from Paris-based crypto firm Kaik, Bitcoin’s 2 percent market depth for Tether USDT pairs aggregated from 15 centralized exchanges has slipped to 6,800 BTC – its lowest since May 2022.
Thin Liquidity Leads To Drastic Price Moves
Matthew Dibb, chief investment officer at Astronaut Capital commented on this situation saying that thin liquidity means more drastic moves in alternative cryptocurrencies. Fund managers are forced wait longer periods like days or weeks for their trades to be executed as realisticaly dwindling market depth has meant that most large funds have not been participating at same level as before due to amount of slippage associated with it leading analyst expect more volatility ahead particularly in altcoin markets which have lower liquidity than top two digital assets.
Visa & Mastercard Put Partnership Plans On Hold Due To Low Crypto Innovation
Recently Visa & Mastercard have put partnership plans on hold due low level innovation they’ve seen coming out from cryptocurrency sector which further adds concerns over falling liquidty levels because if major players like VISA & MASTERCARD don’t come into play then it will be difficult for many traders who want larger trades being executed quickly without waiting days or weeks due lack of funds available with them as result low level innovation by cryptocurrency sector could impact liquidty levels even more going forward than what we’re seeing today .
SEC Cracks Down Robinhood’s Crypto Business Model
Last but not least SEC recently cracked down on Robinhood’s proposed business model related cryptocurrency operations which may result limiting number centralized exchanges available which could further create problem when comes executing large trades quickly so this whole situation should be taken seriously by investors & traders alike before investing any money into cryptocurrencies because right now entire ecosystem looks uncertain with lots risks associated with it so proceed cautiously if you decide invest your hard earned money into cryptocurrencies going forward.
