According to crypto research firm Kaiko, the significant decrease in market liquidity that followed the shutdown of FTX and Alameda Research in November 2022 has now recovered to pre-collapse levels. In a research bulletin on March 18, Kaiko data revealed that the liquidity gap, known as the “Alameda Gap,” has returned to pre-FTX levels, partially due to a recent Bitcoin rally. Kaiko, as a major market maker, coined the term “Alameda gap” in November 2022 to describe the decrease in liquidity on global exchanges caused by significant losses incurred by market makers. This collapse led to a significant decline in available trading liquidity, impacting volumes and market stability, and highlighting the influence of major players in the crypto market in 2022.
However, Kaiko stated that as of last week, Bitcoin’s market depth, representing the volume of orders available at different price levels, has increased by 40% year-to-date and briefly exceeded its pre-FTX average of $470 million. The firm attributed this recovery to the surge in BTC prices, which have gained 60% since the beginning of the year and reached a new all-time high of $73,750 on March 14.
Kaiko also reported that the spreads between BTC/USD prices on three major US exchanges (Coinbase, Kraken, and Bitstamp) have decreased, indicating an improvement in liquidity conditions. The firm noted that this change in spreads could be partly due to structural reasons, and it concluded that the cost of trading in the United States has become much cheaper. The spread refers to the difference between the asking price and the bidding price of an asset.
Earlier this month, it was reported that Bitcoin may face a “sell-side liquidity crisis” later this year if institutional ETF inflows continue. However, daily ETF inflows have significantly slowed down in recent days, dropping below $200 million from highs of over $500 million and a record daily inflow of $1 billion when BTC reached an all-time high.