Five charts showing the drop in crypto liquidity

Crypto liquidity provider explains impact of recent fallout on markets

As the crypto market awaits the verdict on DGC and Genesis lending, our data documents the sharp drop in market liquidity following the shut down of Alameda and FTX on November 8th.

THETA lost 60% of its OKX USDT market depth since November 9th. Source: Efficient Frontie

Market depth, the amount of money bidding in an exchange order book, has taken a hit across many crypto markets. We've analyzed several markets depth at 2% (money bidding at a distance of -2% or +2% from the market price) with some dropping by 50% on major exchanges since November 9th. 

SNX’s orderbook in Coinbase lost  31% in market depth since November 9th. Source:Efficient Frontier

The ‘dry up’ started on November 9th, one day after FTX closed its doors and a day before it was announced that Alameda Research was winding down. Alameda Research served as a market maker for many projects, so their absence has impacted liquidity. We’ve seen this first hand, as some of their former clients approached us. 

FLOW lost 27% of its Binance USDT market depth since November 9th. Source: Efficient Frontier

Concerns of additional exchange shutdowns is also a big factor. Most market makers, including Efficient Frontier, have minimized their capital on exchanges, aiming to decrease exposure to further contagion. 

NEAR’s market depth dropped by 52% on its OKX USDT market. Source: Efficient Frontier

FTM market depth on Binance decreased by 21% since November 9th. Source: Efficient Frontier

The lower the market depth the less money it takes to move the price. The result is increased risk of price volatility which means increased risk for liquidity providers. Market makers manage this risk by decreasing their presence in the order books. This creates a vicious cycle of low liquidity because reduced liquidity in an order book increases the chances of high volatility even more.

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