Thomas Daniels
According to a Nov. 6 study by Kaiko, a premier provider of cryptocurrency market data, Bitcoin’s October rally has not closed the ‘Alameda gap’ that emerged following the FTX debacle one year ago.
The research indicates that the market’s depth is still down by 55% from the levels seen before the FTX incident.
In a period characterized by low volatility, Bitcoin experienced a 20% increase in October 2023, yet the ‘Alameda gap’ persists. This term refers to the significant drop in order book depth that occurred after the collapse of FTX and its affiliate, Alameda Research. Market depth for Bitcoin, Ethereum, and other altcoins on centralized exchanges was reported at $800 million last week, maintaining a position significantly lower than before the FTX crash.
Kaiko attributes this trend partly to the subdued volume and volatility, which have dissuaded sophisticated traders and liquidity providers from engaging in the crypto market. Additionally, the data firm points to structural causes, such as market makers withdrawing from the industry due to losses or entirely exiting the digital asset sphere post-FTX.
Amid concerns about solvency, the past year has seen the crypto community closely monitoring the situation following the FTX downfall, once among the top global crypto exchanges. The issue came to the forefront after a CoinDesk article raised red flags about potential leverage and solvency issues, leading to a billion-dollar shock in the volatile crypto market and precipitating a liquidity crunch for the exchange.
In the final days of December, the former CEO of FTX, Sam Bankman-Fried, was arrested in the Bahamas and extradited to the United States. He pleaded not guilty to all criminal charges in January, although the jury subsequently found him guilty on all counts.
As the cryptocurrency market, including Bitcoin, shows signs of recovery, the overarching question is whether the industry is prepared to turn the page on the FTX chapter.
