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US Banking Crisis Causes Bitcoin Liquidity Drop to A Ten-Month Low



The United States banking crisis has affected U.S-based exchanges and the majority of the traders are suffering because of the increased volatility of the price.

The price of Bitcoin has bounced back since last March’s lows with an increase of almost $28,900. However, the crisis that resulted in the initial price fall is still posing concerns for the market.

Thus; the liquidity of the Bitcoin market experienced a 10-month low drop even though there was a bullish quarter regarding price gain. The dry-up of liquidity is partly caused by the bank’s run in the US and the ongoing regulations on cryptocurrency companies.

United States banking crisis


Initially, BTC liquidity dropped to a 10-month low as the market traders lose access to the USD payment rails.

However, at present, the price of BTC registered a 45% increase which makes it one of the top-performing assets.

Reasons for the Price Rise Concerns

The reason the price gain is causing many concerns is the fact that it came in the middle of an emerging financial crisis within the traditional financial markets.

Most especially, as the bonds and stocks are experiencing one of their worst financial years. The financial disaster led to a bank run in the United States and caused various popular banking giants to collapse.

Furthermore, the banking catastrophe also has a great impact directly on the ecosystem. As a result, the failure of cryptocurrency-friendly banks like; Signature banks and Silicon Valley banks cut the United States dollar payment rails and caused a liquidity disaster, especially on the United States exchanges.

The backlash of the Liquidity Crunch

The liquidity crunch caused a serious backlash. It led to an increase in price volatility thus; forcing the traders to pay higher fees for slippage.

Slippage involves the difference in price between the anticipated price of a transaction and the price at which it is executed fully. For instance; for a $100,000 sales order, the corresponding slippage for the BTC-USD pair on Coinbase skyrocketed to 2.5 times earlier in March.

Whereas, almost at the same time frame, Binance’s BTC-USDT pair slippage didn’t make many moves at all.

Another backlash of the liquidity crunch is the increased price volatility on the United States exchanges. It led to a price inconsistency between USD and BTC pairs causing a drastic increase compared to the non-United States exchanges.

For instance; the BTC price on Binance.US is highly volatile compared to the average price over 10 exchanges.

According to the head of research of on-chain data analytic firm Kaiko, Conor Ryder, the extreme effect of the liquidity issues on traders and the market dulls the United States banking issues. He noted that the stablecoins are replacing the USD pairs.

Moreover, even though it lowers the impact on the United States banking issues, it still harms the U.S. liquidity and is likely to harm investors indirectly.

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