Bloomberg News reports that a protracted absence of liquidity in the digital asset market is playing an instrumental role in what appears to be beyond 10% swings in the Bitcoin price observed in recent weeks.
Scenario of the Market
The market depth has continued to stay at the lowest point in the current year. It was despite the resurgence of late trading activities that were spurred on. It was in part due to the anticipations for a Bitcoin exchange-traded fund as found by the research team of FalconX.
How Have they Measured the Market Depth?
The research team measured the market depth by considering the average volume of activities related to Bitcoin trading within 1% of the current cost, taken on a 24-hour basis.
The Alameda Gap
The plunge in the liquidity overall is being referred to as the Alameda Gap by firm Kaiko, the blockchain data company last November. Alameda Research was known as the trading arm of the failed FTX of Sam Bankman Fried and his empire.
The effect that has stayed on and is still lingering is largely due to excessive losses that were borne by the market makers following the FTX meltdown, as per research by Kaiko. The trial of Bankman Fried resumed today.
Bloomberg News reports that on October 16th, Bitcoin surged by more than 10% in just a matter of minutes. This was due to a false report that was in circulation stating that the United States had approved of ETF that was long awaited. The ETF invests directly in the cryptocurrency. It eliminated most of the surge as quickly as BlackRock stated that the application remained with the SEC.
A similar spike was observed on October 16th. It was due to the trader’s speculation related to the proposed BlackRock fund and its approval. The combination pushed Bitcoin beyond $35,000 seen for the first time in at least one and a half years. At that time, Bitcoin displayed very little change at $34,540 on Monday in New York.
