Market Liquidity Returned to Levels Seen Before FTX Incident

The liquidity in the crypto market has rebounded to levels seen before the downturn triggered by the FTX collapse and the shutdown of Alameda Research in November 2022. The primary driver behind this recovery was the increase in BTC prices.

As per data from Kaiko, on March 18, the crypto market successfully navigated the liquidity crisis, which analysts termed the “Alameda Gap.” The liquidity volume in the market has returned to the levels that existed prior to the downfall of the FTX exchange and the closure of Alameda Research just over a year ago.

The phrase “Alameda Gap” was introduced by analysts in November 2022, highlighting Alameda Research’s significant role as a market maker. Following the firm’s closure, the liquidity in the crypto market experienced a sharp decline.

On-chain analytics reveal that the crypto market began to show signs of improvement last week. Bitcoin’s market depth has risen by 40% since the start of the year and even briefly surpassed the average value of $470 million that was recorded before the FTX crash on March 18.

Analysts attribute this shift to the increasing price of BTC. Its value has surged by 60% since the beginning of the year, reaching a new all-time high. The enhancement in market liquidity is also reflected in the narrowing of BTC/USD spreads. Last week, analysts noted a reduced ratio on the three largest crypto exchanges in the United States: Coinbase, Kraken, and Bitstamp.

A spread on an exchange refers to the difference between the buying and selling prices of an asset. A narrower spread signifies a more liquid asset, while a wider spread indicates the opposite.

Analysts reported that the market experienced recovery in 2023, with cryptocurrency profits totaling $37.6 billion.

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