Crypto Market Liquidity Exhausted After Alameda and FTX Crash

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Crypto Market Liquidity Exhausted After Alameda and FTX Crash

According to Kaiko, the aftermath of the collapse of FTX has left a large liquidity hole.

According to data provider Kaiko, the crypto market has experienced a liquidity crunch following the collapse of crypto exchange FTX and investment fund Alameda Research.

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Both companies were founded by former billionaires Sam Bankman Fried.

Sam, FTX, and Alameda are all extremely important names in the cryptocurrency market. Because they not only own a large crypto asset but also cooperate with many other crypto companies.

Since FTX filed for bankruptcy protection earlier this month, hundreds of companies have said they have a lot of money stuck on FTX.

According to Kaiko, the aftermath of the collapse of FTX has left a large liquidity hole.

Kaiko said:

“Cryptocurrency liquidity is dominated by only a handful of commercial companies, including Wintermute, Amber Group, B2C2, Genesis, Cumberland, and the now-defunct hedge fund (Alameda).

With the loss of one of the biggest market makers, we can expect a significant drop in liquidity, which we will call the 'Alameda gap'.

Kaiko says that 'bitcoin market depth' - which refers to the market's ability to absorb large orders over a specific period of time - has seen a "huge" drop, with the order book (order book) of Creak down 57% while Binance , and Coinbase decrease by 25% and 18% respectively.

bitcoin market depth

Wintermute's Evgeny Gaevoy says that market makers are re-examining their 'exposure' to certain locations in the wake of the FTX crisis as a driving factor in liquidity exhaustion.

“This liquidity crunch can be explained by two factors,” says Wintermute's Gaevoy. “On the one hand, MMs have less access to BTC loans because most of the lenders are either being too cautious or completely dead. At the same time, MMs are looking to reduce their exposure to most centralized exchanges because of security concerns.”

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