BTC’s Price Sees Rise As Liquidity Stalls
A recent analysis by Kaiko, a reputable blockchain analytics platform, revealed fascinating insights into Bitcoin’s liquidity levels. Despite the soaring prices of late October and early November 2023, Bitcoin liquidity is hovering around levels reminiscent of the aftermath of the FTX collapse.
Worryingly, the Alameda gap persists, a phenomenon that continues to influence market dynamics. However, Kaiko’s discoveries highlight a perplexing scenario in the cryptocurrency market. Even as Bitcoin’s price surged due to various fundamental factors, it struggled to shake off the aftermath of the FTX collapse.
However, the digital asset staged an impressive rally, effectively reversing post-FTX losses and surpassing the highs seen in July 2023, reaching almost $32,000. This breakout to new highs for the second half of 2023 was notable.
Analysts associated the surge with a substantial increase in trading volume, a key indicator denoting strong support for the ongoing uptrend. Market observers remain concerned about the lingering Alameda gap despite this upward momentum.
The continuation of the Alameda gap, combined with Bitcoin’s liquidity status, has added an intriguing narrative to the cryptocurrency price movement. Some analysts and industry experts express caution in the face of the market’s apparent resilience.
However, others argue that the trend is evidence of Bitcoin’s underlying strength.
Bitcoin’s 20% Rise Fails To Correct Alameda Debacle
The resilience of Bitcoin, despite the crypto market’s fluctuations, has caught the interest of the crypto community. Despite Bitcoin’s impressive 20% surge in October 2023, Kaiko highlights the persistence of the infamous “Alameda gap” and an overall scarcity of market liquidity.
This phenomenon was coined by analysts following market conditions after the November 2022 FTX collapse. Notably, this exchange’s collapse also resulted in the dissolution of Alameda Research, the firm’s trading arm.
Alameda Research was a key player in the crypto and Bitcoin markets, essential in preserving liquidity. Its active involvement in buying and selling large amounts of BTC ensured that users had a smooth trading experience, minimizing slippage and facilitating seamless transactions.
However, its abrupt demise created a large void in Bitcoin’s liquidity landscape, which remains unfilled despite Bitcoin’s price gains in recent weeks. The collapse of FTX made headlines, but the implications were well beyond the news cycle.
It caused a chain reaction in the crypto market that severely impacted Bitcoin’s liquidity, exacerbated by Alameda Research’s lack of market presence.
Prospects Of Improved Liquidity Looms
Despite narrowing the Alameda gap at spot rates, overall market liquidity still needs to improve, posing challenges to the once-smooth trading experience. However, the potential approval of a spot Bitcoin exchange-traded fund (ETF) by the United States Securities and Exchange Commission (SEC) provides hope for the sector.
The imminent approval could provide a much-needed boost to the market’s liquidity dynamics. A side benefit of this approval is that it would likely change how investors interact with cryptocurrency.
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