Bitcoin’s Big Moves Are Being Magnified by a Protracted Lack of Liquidity
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A protracted dearth of liquidity in cryptocurrency markets is playing a key role in the more than 10% swings in the price of Bitcoin seen in recent weeks. Market depth remains at its lowest point this year even with the recent resurgence in trading activity being spurred on in part by expectations for a Bitcoin exchange-traded fund, FalconX's research team found. They measure market depth by looking at the average volume of Bitcoin trading activities within 1% of its current price, on a 24-hour basis. The drop in overall liquidity was dubbed the “Alameda Gap” last November by blockchain-data firm Kaiko. Alameda Research was the trading arm of Bankman-Fried's failed FTX digital empire. The lingering effect is largely a result of the huge losses that market makers incurred after t...