According to cryptocurrency research firm Kaiko, a significant decline in market liquidity that lasted until. The closure of FTX and Alameda Research in November 2022 has now rebounded to pre-collapse levels.
Kaiko data, reported in a research bulletin on March 18, indicates that the liquidity gap, often known as the “Alameda Gap.” Partially rebounded to pre-FTX levels last week, thanks to a recent surge in Bitcoin prices.
Because the company was a significant market maker, Kaiko came up with the term “Alameda gap” in November 2022. It alludes to a reduction in liquidity on international exchanges brought on by substantial losses sustained by market makers.
Bitcoin Market Depth Rebounds, Exceeds Pre-FTX Levels
The collapse led to a significant drop in trading liquidity, impacting volumes and market stability. Underscoring the role of major players in crypto markets in 2022. Kaiko observed this gap persisting for over a year, as market makers awaited market recovery.
Nevertheless, Kaiko reported that as of last week, Bitcoin’s 2% market depth had increased by 40% year-to-date, briefly surpassing its pre-FTX average of $470 million.
“As of last week, market depth has almost fully recovered and is back to its pre-FTX average,” it noted.
Bitcoin market depth. Source: Kaiko
The firm attributed this to the surge in BTC prices which have gained 60% since the beginning of this year and notched a new all-time high of $73,750 on March 14.
In the meantime, BTC/USD spreads have decreased on Coinbase, Kraken, and Bitstamp. Three significant U.S. exchanges, according to Kaiko, “suggesting liquidity conditions are meaningfully improving.”
It acknowledged that structural factors may have contributed to the shift in spreads before coming to the conclusion that trading in the US is now far less expensive. The gap between an asset’s asking and bidding prices is known as a spread.
Recently, daily ETF inflows dropped below $200 million from highs above $500 million. After a record $1 billion inflow last week as Bitcoin peaked.
