The cryptocurrency market is still facing challenges due to liquidity fragmentation, causing price differences between exchanges.
A recent report by Kaiko revealed that these discrepancies are slowly decreasing over time, but they are more prominent on smaller, less liquid exchanges, especially during market fluctuations like the recent sell-off last week.
Price slippage, which occurs when the expected price of an order differs from the execution price, is a key indicator of liquidity.
During the sell-off on Aug. 5, Kaiko found that most exchanges experienced increased slippage in Bitcoin (BTC) orders of $100,000. Some exchanges and trading pairs had even higher spikes in slippage.
For example, Zaif’s BTC-JPY pair had the highest slippage, and KuCoin’s BTC-EUR pair exceeded 5%. Additionally, stablecoin-quoted pairs on BitMEX and Binance US also saw significant increases in slippage.
The report also noted that liquidity impact can vary not only among exchanges but also within trading pairs on the same exchange. It mentioned:
“Coinbase’s BTC-EUR pair is less liquid than its BTC-USD pair. This difference can lead to extreme volatility during high market activity, as seen in March when Coinbase’s BTC-EUR prices diverged significantly from the broader market.”
Furthermore, BTC prices on Binance.US differed greatly from more liquid platforms due to reduced liquidity following the SEC’s lawsuit in June 2023. Binance.US currently handles only $20 million in daily trade volume, down from $400 million in early 2023.
Liquidity concentration has increased on weekdays, especially in BTC-USD markets, after the introduction of spot Bitcoin exchange-traded funds (ETFs) in the US. This trend raises the risk of significant price swings during weekends under market pressure.
Despite these challenges, crypto platforms have made substantial investments in infrastructure to manage higher trade volumes without disruptions. During the recent sell-off, trade counts for BTC-USD and BTC-USDT reached record highs on Bybit and returned to pre-FTX collapse levels on Coinbase.
Bitcoin Market Data
At the time of writing 11:09 pm UTC on Aug. 12, 2024, Bitcoin holds the #1 rank by market cap, with a price decrease of 0.04% in the last 24 hours. Bitcoin’s market cap stands at $1.17 trillion, with a 24-hour trading volume of $37.25 billion. Learn more about Bitcoin ›
Crypto Market Summary
As of 11:09 pm UTC on Aug. 12, 2024, the total crypto market is valued at $2.09 trillion with a 24-hour volume of $83.08 billion. Bitcoin dominance currently sits at 55.84%. Learn more about the crypto market ›
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