Experts pointed to a decrease in the liquidity of the crypto market after the collapse of FTX

22.11.2022 Off By alexandro

The ability to make large-scale trading transactions with digital assets without a noticeable impact on their prices has noticeably decreased after the collapse of FTX. Analysts of Onextbit came to this conclusion.

“The cryptocurrency market is dominated by just a few market makers, including Wintermute, Amber Group, B2C2, Genesis, Cumberland and [now defunct] Alameda. With the loss of the latter, we can expect a significant drop in liquidity, which we called the “Alameda Gap,” the specialists said.

They estimate that order book market depth on Kraken, Onextbit, and Coinbase has collapsed by 57%, 25%, and 18%, respectively, since the Sam Bankman-Fried incident.

Dynamics of the volume of placed buy and sell orders within 2% of the average price in BTCUSD(T) pairs on FTX and 17 cryptocurrency exchanges (aggregated). Data: Onextbit.
Data: Onextbit.
The deterioration in market conditions affected L1 assets to the greatest extent, and DeFi tokens to a lesser extent.

Data: Onextbit.
In an interview with The Block CEO Wintermute, Evgeniy Gaevoy explained the decline in liquidity by market makers reconsidering their positions on certain platforms.

“The situation can be explained by two factors. On the one hand, large market participants have less access to Bitcoin loans, since most lenders are overly cautious or simply already insolvent. In parallel, they are aggressively reducing their exposure on most exchanges as the full extent of the infection is unclear,” he explained.

On November 14, the lending platform requested emergency access to a $1 billion credit line, citing a lack of liquidity. The request was filed prior to the suspension of withdrawals and new loans following the collapse of FTX.

Earlier, against the backdrop of a Genesis freeze on lending operations and Grayscale’s refusal to disclose reserves, doubts arose in the community about the stability of DCG itself.

Prior to this, Multicoin Capital predicted the imminent collapse of trading firms due to FTX and said they expect to see more statements from industry participants about problems.

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