Crypto market liquidity recovered to pre-downturn levels following the collapse of FTX and the closure of Alameda Research in November 2022. The main catalyst for this recovery was the rise in BTC quotes.
According to Kaiko data, on March 18, the crypto market was able to overcome the liquidity crisis, which analysts referred to as the “Alameda Gap.” The market liquidity volume recovered to the level that preceded the collapse of crypto exchange FTX and the closure of Alameda Research a little over a year ago.
Analysts coined the term “Alameda Gap” in November 2022. It reflects Alameda Research’s role as a major market maker. After the company’s closure, the crypto market’s liquidity level plummeted.
On-chain analytics indicate that the crypto market started to improve last week. Bitcoin’s market depth increased by 40% since the beginning of the year and even briefly exceeded the average value before the FTX crash of $470 million on March 18.
Analysts attribute the change to the rising value of BTC. Its quotes grew by 60% since the beginning of the year and reached a new all-time high. The growing market liquidity is also indicated by the decreasing level of the BTC/USD spreads. Last week, analysts recorded a decreased ratio on the three largest crypto exchanges in the United States: Coinbase, Kraken, and Bitstamp.
A spread on an exchange is the difference between an asset’s buy and sell prices. A smaller spread indicates a more liquid asset, and vice versa.
Analysts stated that the market recovered in 2023, as the profit from cryptocurrencies amounted to $37.6 billion.
