Catch Ya Later! Altcoin Liquidity Fleeing To Offshore Exchanges After FTX Collapse, Research Report Says

Liquidity in the altcoin market is becoming increasingly concentrated on offshore exchanges, according to a new report.

What Happened: A Kaiko analysis reveals that offshore exchanges now account for 69% of the total altcoin liquidity, a sharp rise from 55% in early 2022.

This trend is primarily driven by large and mid-cap altcoins, which have seen a resurgence in trading volume and market depth in recent months.

Liquidity dropped more than 60% between April and December 2022, but the market has gradually recovered, surpassing its pre-FTX average in Q1 2024 before pulling back in Q3.

However, this recovery has been uneven.

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Large-cap altcoins have gained considerably more market share, with the top ten altcoins by market cap accounting for 60% of total liquidity depth, up from around 50% in early 2022.

“Altcoin liquidity has been heavily impacted by the collapse of FTX and Terra,” the report states, highlighting how recent events have shaped market dynamics.

Despite the rebound, the uneven distribution of liquidity highlights a growing concentration on offshore platforms.

Additionally, the report notes a contrasting trend for Bitcoin BTC/USD.

“We observe the opposite trend in Bitcoin liquidity, with U.S. exchanges gaining share relative to offshore markets,” the report states, suggesting that some market makers may have de-risked their portfolios or rotated into Bitcoin amid the market’s volatility.

Altcoin market depth has remained relatively flat at $270 million in Q3, suggesting that market makers continue to provide liquidity.

However, this growing concentration among top altcoins and offshore exchanges could pose challenges for smaller assets struggling to maintain liquidity and exposure in an increasingly competitive environment.

What’s Next: These market trends and their implications for investors will be key topics of discussion at Benzinga's Future of Digital Assets conference on Nov. 19.

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