Bitcoin

Despite an impressive 45% price surge in 2023, Bitcoin’s market liquidity has reached a 10-month low. This downturn is partially attributed to the ongoing bank run in the United States and increasing regulatory scrutiny targeting cryptocurrency companies.
<blockquote>
The liquidity situation in crypto is worsening after the banking fears this month <img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f4c9.png" alt="&#x1f4c9;" />
I dived into several liquidity metrics to give an update on all things crypto liquidity<img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f9f5.png" alt="&#x1f9f5;" />
First, <a href="https://twitter.com/search?q&#61;%24BTC&amp;src&#61;ctag&amp;ref_src&#61;twsrc%5Etfw" rel="noopener noreferrer nofollow">$BTC</a> liquidity has dropped to 10 month lows as market makers lose access to USD payment rails<img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f447.png" alt="&#x1f447;" /> <a href="https://t.co/RwcBEJ8y5Z" rel="noopener noreferrer nofollow">pic.twitter.com/RwcBEJ8y5Z</a>
— Conor Ryder (&#64;ConorRyder) <a href="https://twitter.com/ConorRyder/status/1638949262703599617?ref_src&#61;twsrc%5Etfw" rel="noopener noreferrer nofollow">March 23, 2023</a></blockquote>

As one of the best-performing assets this year, <a href="https://crypto.ro/en/bitcoin/" rel="noopener noreferrer nofollow">Bitcoin</a>‘s rise in value coincides with a looming financial crisis in traditional markets. Stocks and bonds are currently experiencing one of their worst years, with the crisis leading to the collapse of several banks.
This banking crisis has had a direct impact on the cryptocurrency ecosystem. T<a href="https://crypto.ro/en/news/chapter-11-bankruptcy-filed-by-svb-financial-group/" rel="noopener noreferrer nofollow">he failure of crypto-friendly banks</a>, such as Silicon Valley Bank and Signature Bank, has disrupted crucial US dollar payment channels for <a href="https://crypto.ro/en/cryptocurrencies/" rel="noopener noreferrer nofollow">cryptocurrency</a> transactions. As a result, a liquidity crisis has emerged, particularly on US-based exchanges.
<img src="https://crypto.ro/en/wp-content/uploads/2023/04/Liquidity-on-U.S.-vs.-non-U.S.-exchanges.jpg" alt="Liquidity on U.S. vs. non U.S." />Liquidity Comparison: US Exchanges Versus Non-US Exchange | Kaiko
The scarcity of liquidity has led to increased price volatility, causing traders to pay higher fees due to slippage.
Slippage refers to the discrepancy between the expected price of a transaction and the final price at which it is executed. For example, a $100,000 sell order on <a href="https://www.coinbase.com" rel="noopener noreferrer nofollow">Coinbase</a> saw the slippage for the BTC/USD pair increase by 2.5 times in early March. In contrast, the slippage for <a href="https://crypto.ro/en/exchange/binance/" rel="noopener noreferrer nofollow">Binance</a>‘s BTC/USDT pair remained relatively stable during the same period.
<img src="https://crypto.ro/en/wp-content/uploads/2023/04/USD-vs.-USDT-price-slippage.jpg" alt="USD vs. USDT price slippage" />Price Slippage: USD Pairs Compared to USDT Pairs | Kaiko
The liquidity crisis has also resulted in heightened price volatility on US exchanges, with a significant increase in price discrepancy between BTC and US dollar pairs compared to non-US exchanges. For instance, the price of BTC on Binance.US has exhibited greater volatility than the average price across ten other exchanges.
<img src="https://crypto.ro/en/wp-content/uploads/2023/04/Binance.US-price-difference-vs.-10-exchanges.jpg" alt="Binance.US price difference vs. 10" />Price Discrepancy: Binance.US Compared to Ten Other Exchanges | Kaiko
Conor Ryder, Research Head at on-chain data analytics firm Kaiko, has shed light on the severe consequences of the liquidity crisis on both traders and the overall market. He <a href="https://twitter.com/ConorRyder/status/1638949278013063168?s&#61;20" rel="noopener noreferrer nofollow">pointed</a> out that stablecoins are increasingly replacing US dollar pairs, which, although mitigating the impact of the US banking crisis to some extent, has negatively affected liquidity within the United States. This, in turn, indirectly harms domestic investors.
As the crypto market grapples with this liquidity crisis, it highlights the need for solutions that address challenges in both the traditional financial market and the crypto ecosystem.

Bitcoin market liquidity hits 10-month low

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