Close Menu
Invest Intellect
    Facebook X (Twitter) Instagram
    Invest Intellect
    Facebook X (Twitter) Instagram Pinterest
    • Home
    • Commodities
    • Cryptocurrency
    • Fintech
    • Investments
    • Precious Metal
    • Property
    • Stock Market
    Invest Intellect
    Home»Cryptocurrency»Liquidity Crisis Causes Major Price Slippages During Cryptocurrency Sell-Offs: Kaiko
    Cryptocurrency

    Liquidity Crisis Causes Major Price Slippages During Cryptocurrency Sell-Offs: Kaiko

    August 13, 20243 Mins Read


    The cryptocurrency market is facing a growing liquidity crisis, as evidenced by the significant price slippages observed during recent sell-offs.

    According to research by Kaiko, the ongoing issue of liquidity fragmentation across crypto exchanges has resulted in noticeable price discrepancies, particularly during periods of market stress.

    Price Slippage

    Liquidity fragmentation refers to the uneven distribution of liquidity across various exchanges. The recent market sell-off brought these issues to the forefront, with BTC prices on Binance.US being different from those on more liquid platforms.

    Binance.US, a platform that has struggled with liquidity since the SEC lawsuit in June 2023, has seen its daily trade volume plummet from $400 million in early 2023 to just $20 million today.

    The decline in liquidity has made the platform particularly vulnerable to price discrepancies during market events, such as the August 5th sell-off. During this event, less liquid altcoins experienced even greater price discrepancies, increasing the challenges faced by traders.

    Price slippage, an indicator of liquidity, tends to rise during market sell-offs as liquidity dries up, complicating order execution at desired prices. Kaiko’s data reveals that on August 5th, price slippage increased across most exchanges, with certain platforms and trading pairs experiencing more severe spikes.

    For instance, Zaif’s BTC-JPY pair faced the highest slippage due to the Bank of Japan’s rate hike, while KuCoin’s BTC-EUR pair saw discrepancies exceed 5%, highlighting the risks for traders in less liquid markets. Even typically liquid stablecoin pairs like BitMEX and Binance.US’s USDT and USDC pairs weren’t immune, with slippage rising by over three basis points.

    The effects of liquidity events can vary not just between exchanges but also within trading pairs on the same platform. For example, Coinbase’s BTC-EUR pair is significantly less liquid than its BTC-USD counterpart, resulting in extreme volatility during periods of intense market activity.

    This was evident in March when Coinbase’s BTC-EUR price diverged sharply from the broader market, leading to a significant drop in market depth.

    Weekday Trading Surge

    Another factor contributing to the liquidity crisis is the concentration of trading during weekdays, especially in BTC-USD markets. This trend, intensified by the launch of U.S. spot ETFs, increases weekend volatility. Unlike traditional markets, crypto markets operate 24/7, so Friday sell-offs can worsen weekend uncertainty, amplifying price impacts.

    During the recent sell-off, bitcoin’s price moved 14% between Monday’s open and Friday’s close, mirroring movements seen in major sell-offs since 2020.

    Despite the challenges of liquidity fragmentation, Kaiko notes that crypto platforms have significantly invested in infrastructure to handle higher trade volumes without outages, reducing arbitrage costs across exchanges.

    SPECIAL OFFER (Sponsored)

    Binance Free $600 (CryptoPotato Exclusive): Use this link to register a new account and receive $600 exclusive welcome offer on Binance (full details).

    LIMITED OFFER 2024 at BYDFi Exchange: Up to $2,888 welcome reward, use this link to register and open a 100 USDT-M position for free!



    Source link

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

    Related Posts

    Cryptocurrency Billionaire Sells His South Florida Penthouse for $28.6 Million

    Cryptocurrency

    Unveiling The Evolution Of In-Play Betting With Digital Currency Dynamics

    Cryptocurrency

    How crypto gambling is changing Manchester’s entertainment landscape

    Cryptocurrency

    How to Recover Lost or Stolen Cryptocurrency: The Ultimate Guide to Crypto Recovery

    Cryptocurrency

    Russian Agricultural Bank, CBR exploring using cryptocurrency for payments in grain trade

    Cryptocurrency

    Cryptocurrency kiosk regulations become law in Iowa | News

    Cryptocurrency
    Leave A Reply Cancel Reply

    Top Picks
    Stock Market

    5 things to know before the stock market opens Tuesday, October 29

    Commodities

    Bill Gates taille dans ses effectifs et corrige sa stratégie sous l’ère Trump

    Investments

    Should I invest in a property far from my home?

    Editors Picks

    Jeff Bezos Investments in 2025: 12 Companies Bezos Is Investing In

    March 2, 2025

    FERC rejects Basin Electric’s cryptocurrency mining rate proposal

    August 21, 2024

    Greenpeace condamnée à verser plus de 665 millions de dollars à l’exploitant d’un oléoduc américain, l’ONG craint la « faillite »

    March 19, 2025

    Gojira, Hellfest… Le « heavy metal » à la française vaut de l’or

    February 14, 2025
    What's Hot

    A quiet revolution is transforming business investment

    August 11, 2024

    APAC Real Estate Investments Hit US$32.9 Billion In 3Q24

    October 17, 2024

    Dollar Up, Bond Futures Down on Trump-Win Bets: Markets Wrap

    July 15, 2024
    Our Picks

    Fund Green Energy Projects with Tax Exempt Bonds, Credits: CLA

    August 8, 2024

    Silver Range Resources Ltd. définit une cible de forage d’exploration à East Goldfield

    April 9, 2025

    WilmerHale Named Intellectual Property Firm of the Year by Chambers USA

    June 18, 2024
    Weekly Top

    Axiom Emerging Markets Corporate Bonds fête son premier anniversaire

    June 2, 2025

    Egypt’s agricultural exports surpass 4.8mln tons in 5 months

    June 2, 2025

    How the AI rush is reshaping electric utilities

    June 2, 2025
    Editor's Pick

    Continental’s second exit of the agricultural tyre sector since 2000

    April 4, 2025

    La BAD, PowerGen et des partenaires lancent une plateforme transformatrice d’énergie renouvelable

    January 17, 2025

    ITC, Infosys, Angel One Among Stocks To Trade Ex-Dividend This Week

    May 24, 2025
    © 2025 Invest Intellect
    • Contact us
    • Privacy Policy
    • Terms and Conditions

    Type above and press Enter to search. Press Esc to cancel.