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By just about any measure, Bitcoin liquidity remains low, despite the cryptocurrency’s eye-catching upsurge this year.
Investors have been paying more on trades because of slippage, or the difference between the expected price of a transaction and the price at which it’s fully executed, a sign of worsening liquidity, according to Conor Ryder at Kaiko. The higher the difficulty in trading, the more investors are exposed to potential volatile price swings.
This can happen due to a change in the bid-ask spread between the time a trade is placed and filled, or when there’s insufficient order-book depth to support large orders.
Even as a rebound in Bitcoin this year made it the best-performing asset in the first quarter, a widening US regulatory crackdown and the collapse of a few crypto-adjacent banks has tempered some investors’ enthusiasm.
“It’s more indicative of the institutional reluctancy to offer liquidity in the space,” Ryder, a research analyst at the Paris-based firm, said. A lot of crypto firms don’t want to get caught in the middle of a battle between US regulators and exchanges.”
This can happen due to a change in the bid-ask spread between the time a trade is placed and filled, or when there’s insufficient order-book depth to support large orders.
Even as a rebound in Bitcoin this year made it the best-performing asset in the first quarter, a widening US regulatory crackdown and the collapse of a few crypto-adjacent banks has tempered some investors’ enthusiasm. — Bloomberg.
Online Reporter