Bitcoin Liquidity is Drying Up as Crypto ‘Tourists’ Recoil From Industry Disorder
(Bloomberg) — By just about any measure, Bitcoin liquidity remains low, despite the cryptocurrencys eye-catching upsurge this year. Investors have been paying more on trades because of slippage, or the difference between the expected price of a transaction and the price at which its fully executed, a sign of worsening liquidity, according to Conor Ryder at Kaiko. The higher the difficulty in trading, the more investors are exposed to potential volatile price swings. This can happen due to a change in the bid-ask spread in between the time a trade is placed and filled, or when theres insufficient order-book depth to support large orders. Even as a rebound in Bitcoin this year made it the best-performing asset in the first quarter, a widening US regulatory crackdown and the collapse of a few crypto-adjacent banks has tempered some investors enthusiasm. “It‘s more indicative of the institutional reluctancy to offer liquidity in the space,” Ryder, a research analyst at the Paris-based firm, said. A lot of crypto firms don’t want to get caught in the middle of a battle between US regulators and exchanges. Though prices have recovered at the start of 2023, trading volumes and liquidity in the crypto market have dried up when measured over