Bitcoin Liquidity Drops To 10-Month Low — Panic Selling To Follow?

The ongoing banking crisis has caused liquidity in Bitcoin BTC/USD to hit a 10-month low, even lower than the aftermath of FTX, a new report has revealed.

Cryptocurrency data provider Kaiko highlighted the critical role of market depth, spreads, slippage and volumes in measuring liquidity in crypto markets. Market depth, which represents the number of orders waiting to be filled within a certain price range, was particularly relevant in this regard.

The data showed that liquidity had dropped significantly in the Bitcoin market.

The closure of Silvergate Capital Corp.s SI SEN network and Signature's Signet payment network, two critical pieces of infrastructure for market makers in the space, impacted liquidity in the U.S. exchanges.

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The report also discussed how the lack of USD payment rails had affected liquidity, with spreads being more volatile as banking issues worsened and slippage increased due to a lack of liquidity.

Volumes have picked up, but the lack of liquidity had resulted in reduced depth, spreads, and slippage, creating a less attractive asset class for the next wave of investors.

The report concluded that USD pairs were being phased out by investors in favor of stablecoins, making the lack of USD payment rails an institutional problem that would have knock-on effects on everyone in the space.

The report did express optimism that a payment network similar to SEN or Signet would emerge in the U.S., resulting in a boost to liquidity, less volatility and a more attractive asset class for investors.

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