- The introduction of spot Bitcoin ETFs in the US has exacerbated the liquidity concentration problems and increased the probability of large weekend price movements.
The fragmentation of liquidity in the cryptocurrency markets persists, causing price disparities among exchanges.
These differences are narrowing with time, but they are still noticeable on smaller, less liquid exchanges, particularly during market events like as the sell-off that occurred last week, according to a new Kaiko analysis.
Price slippage, a crucial measure of liquidity, is when the predicted price of a market order deviates from the execution price.
Kaiko estimated that most exchanges displayed greater slippage in their $100,000 Bitcoin (BTC) orders during the August 5 sell-off. Notably, on certain exchanges and trading pairings, the surge was noticeably more noticeable.
The BTC-JPY pair on Zaif had the most slippage, whilst the BTC-EUR pair on KuCoin had more than 5%. In the meanwhile, BitMEX and Binance US’s normally liquid stablecoin-quoted pairs experienced significant rises.
The analysis also made clear that different trading pairings on the same exchange can have different effects on liquidity.
Moreover, BTC prices on Binance.US deviated dramatically from more liquid platforms, as the platform confronts lower liquidity following the SEC’s June 2023 complaint. The daily transaction volume processed by Binance.US has decreased from $400 million in early 2023 to about $20 million at this point.
Weekday liquidity concentration has also increased, especially in BTC-USD markets, in the wake of the US introduction of spot Bitcoin exchange-traded funds (ETFs). In times of market stress, this trend increases the likelihood of significant weekend price movements.
Crypto platforms have made significant infrastructure investments in spite of these difficulties, allowing them to manage higher trade volumes without experiencing any disruptions. Trade counts for BTC-USD and BTC-USDT reached all-time highs on Bybit during the latest sell-off, while on Coinbase, they reached levels not seen since the collapse of FTX.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
