Gemini, Coinbase, and Binance US Experience Major Decrease in Market Depth in March 2023

According to recent reports by Kaiko, some of the world’s largest cryptocurrency exchanges have seen a significant drop in market depth due to disruptions in USD payment channels and crypto bank failures.

Specifically, Gemini’s market depth fell by 74% in March, Coinbase by 50%, and BinanceUS by 29%. However, Binance Global only saw a drop of 13%. This lack of liquidity could lead to more price volatility and unpredictable swings in both directions.

The crypto market liquidity in March was already down 52% before the news hit that depositors in SVB would be made whole. This only added to the volatility of prices in the immediate aftermath. However, the market depth increased by over $125m overnight, or 30%, as price effects played a role in restoring USD liquidity to exchanges.

Interestingly, a closer look at liquidity at the pair-level shows that a large portion of the increase actually came from renewed liquidity for USDC in particular. As Circle gained access to the $3.3bn they had in SVB as soon as Monday morning, USDC moved closer to its peg and market makers began offering liquidity for USDC pairs again.

Using USDC as the base asset, there was a huge spike of over $100m in extra liquidity offered overnight, with over $60m belonging to the relisted USDC-USDT pair on Binance, while the USDC-USD pair on Kraken saw an injection of $20m in liquidity as well.

The lack of liquidity and the recent disruptions in USD payment channels and crypto bank failures have highlighted the need for greater stability and security in the cryptocurrency market.

In conclusion, the drop in market depth on some of the major cryptocurrency exchanges is a cause for concern, as it can lead to increased price volatility and longer transaction times. It is crucial for exchanges to take steps to address these issues and ensure that they have sufficient liquidity to meet the needs of their customers.

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