According to a recent analysis from Bitfinex, the liquidity crunch in the crypto industry could allow event-based volatility to have a greater impact on prices. In August, capital outflows in the crypto markets reached $55 billion, affecting not only Bitcoin but also Ether and stablecoin liquidity. The analysis also highlights the return of event-based volatility, where isolated events can significantly impact prices and overall market movements. Two events in August, a flash crash and Grayscale’s legal victory, had a notable impact on Bitcoin prices. The analysis suggests that the liquidity crunch has allowed these isolated events to have a bigger influence on market movements. Additionally, the analysis notes that Bitcoin open interest has outperformed the crypto markets due to increased institutional interest and wash trading on some exchanges, while Ether futures and options have declined significantly. The low liquidity patterns in the derivatives market further support the notion of a liquidity crunch. Overall, the analysis emphasizes the importance of monitoring liquidity and its potential impact on market volatility.
– Crypto’s liquidity crunch could lead to greater impact of event-based volatility on prices
– Capital outflows in the crypto industry reached $55 billion in August
– Bitcoin, Ether, and stablecoin liquidity were all affected by the capital outflows
– Isolated events in August had significant impacts on Bitcoin prices
– The liquidity crunch allows isolated events to have a bigger influence on market movements
– Bitcoin open interest has outperformed the crypto markets due to institutional interest and wash trading
– Ether futures and options have declined significantly
– Low liquidity patterns in the derivatives market further support the notion of a liquidity crunch