'Alameda Gap' seen drying up liquidity across crypto markets
BNN Bloomberg
The wipeout of Sam Bankman-Fried’s crypto empire, including its crown jewel FTX exchange and sister trading desk Alameda Research, is helping to reduce liquidity across the crypto market.
The decline has been dubbed the “Alameda Gap” by blockchain-data firm Kaiko, named for the trading group at the center of the storm which is closing its books. Plunges in liquidity usually come during periods of volatility as trading shops pull bids and asks from their order books to better regulate risks, Kaiko noted in a Nov. 17 newsletter.
“The Alameda Gap in liquidity could be here to stay, at least in the short term,” wrote the analysts.
These market makers fulfill an especially valuable role in the liquidity-sensitive crypto space by buying and selling coins. But as they turn more conservative in times of crisis, that results in thinner liquidity where users have greater difficulty buying or selling an asset, which in turn makes the market more volatile, said Hank Huang, chief technology officer at Kronos Research.
