Bitcoin price is trending up on the daily chart.
Bitcoin (BTC) price is rising at spot rates, and recently broke above the July 2023 resistance level. The coin is at new 2023 highs, recovering after falling in 2022.
Part of the sharp sell-off, especially in November 2022, was due to the collapse of FTX and Alameda Research, the trading wing of the defunct crypto exchange.
BTC Recovers, but Liquidity is at November 2022 Level
According to Kaiko, a blockchain analytics platform, Bitcoin liquidity is around the post-FTX crash level and the Alameda gap still exists. It should be noted that this development comes despite the rapid rise in cryptocurrency prices in late October and early November 2023.
Bitcoin, affected by fundamental factors, is recovering, reversing post-FTX losses and surpassing the July 2023 high at around $32,000. The breakout to new H2 2023 highs was due to increased trading volume, suggesting that the uptrend is supported.
Kaiko notes that although Bitcoin rose 20% in October, the “Alameda Gap” persists and overall market liquidity remains tight. The Alameda breach is the observed drop in liquidity that affected the Bitcoin market after FTX filed for bankruptcy in November 2022.
Then, as mentioned above, the FTX collapse also caused Alameda Research, a trading wing associated with the exchange, will be withdrawn.
While the FTX collapse made headlines, Alameda Research was one of the top markets in the cryptocurrency and Bitcoin market. The company provided liquidity by playing its role of actively buying and selling large amounts of BTC on demand, allowing users to trade seamlessly and without slippage.
Once it fell, there was a significant drop in Bitcoin liquidity, and this has never changed, even as Bitcoin prices more than doubled from the 2022 bottoms.
Bitcoin Spot ETF Approval Coming Soon
Grayscale Investments CEO Michael Sonnenshein recently generated intrigue, hinting at a major upcoming development in the cryptocurrency market. His words were widely interpreted by many as a sign of the early approval of a Bitcoin ETF.
The approval of such an ETF would mark a watershed moment for Bitcoin. Therefore, improving its overall appeal and accessibility to a wider range of investors. “It has been a ten-year dress rehearsal. “We are ready for the main event.”
Interestingly, Nate Geraci, president of ETF Store, fueled the growing speculation. Citing Bloomberg’s James Seyffart, Geraci suggested that the SEC could issue crucial 19b-4 approval orders this week. This move would be significant and would lay the groundwork for the Bitcoin Spot ETF listing in the United States.
Will Liquidity Increase After Bitcoin Spot ETF Approval?
With low liquidity across the board, Bitcoin trading is not as easy as it was before the collapse of FTX and Alameda Research. However, the Alameda gap is narrowing to spot rates, but market liquidity is still lower by more than 50%.
The eventual approval of a spot Bitcoin exchange-traded fund (ETF) by the strict United States Securities and Exchange Commission (SEC) could improve liquidity in the coming months. Specifically, a spot Bitcoin ETF allows investors to have direct exposure to Bitcoin without having to buy or sell the currency directly. Consequently, this could increase demand for Bitcoin and increase volatility.
Additionally, due to clearer regulation, since the product is approved by the SEC, greater institutional interest could attract more capital to the industry. Featured image from Canva, TradingView chart
By Leonardo Perez