The crypto market has been marked by inherent volatility, and the recent sentiments on Bitcoin have centered the asset as an unpredictable digital currency. A clear incident of this is the recent soaring of its price, which was unprecedented and later plummeting just as fast.
This was a result of a false publication on the X platform on Monday that caused price shifts in the market. One significant aspect to consider in dealing with cryptocurrencies is liquidity. Liquidity refers to the ease with which digital assets can be bought or sold in the crypto market without causing a significant change in price or fluctuation.
Bitcoin’s liquidity is among the assets to take into consideration in the Binance exchange platform. It has faced many challenges, one being the notable ETF rumored incident on Monday. The misinformation caused a rollercoaster of Bitcoin’s price.
Bitcoin liquidity on Binance
Binance is well known for its reliability as it has listed over 340 cryptocurrencies and allows trading and exchange of these digital assets. It is the world’s largest digital currency exchange by trading volume.
Amidst the spot Bitcoin Exchange-Traded Funds (ETF) rumors, Bitcoin traders on Binance were at a disadvantage compared to traders on other prominent exchange platforms like Coinbase and Kraken. This was according to the Parise-based Kaiko, the leading crypto market data provider.
According to the Kaiko order book data, Kraken’s and Coinbase’s (COIN) liquidity outperformed Binance amidst the liquidity meltdown. Binance’s ask and bid depth were extremely lower than the other top exchanges, and this was a huge disadvantage to traders on the BNB platform.
The 0.1 measure of buy-side liquidity on Binance crashed to 1.2 BTC, valued at $30,000. This was a significant drop from 100 BTC. Moreover, this caused a volatile explosion in the Bitcoin price caused by the false report. The 0.1% ask depth is the number of pending buy orders that are within the 0.1% of the average between the bid and ask price.
Simply put, the higher the ask depth and bid price, the more efficient it is to proceed with large sell orders and execute large buy orders as well. This is advantageous since it’s done at stable prices with lower slippage. It refers to the difference between the digital currency’s actual price and the expected price where trades are placed.
How the false ETF report affected BTC
The false information caused the BTC price to peak close to the $30,000 mark, causing a 7.5% rise. This was corrected after the gains dropped almost as quickly as when the report was denied by BlackRock and the SEC. The false report on X by Cointelegraph stated the approval of the BlackRock (BLK) iShare spot ETF by the US Securities and Exchange Commission.
The result of this false information was the liquidation of long orders that were corrected and caused traders to lose their trades due to margin calls. Moreover, some traders recorded huge slippage that was as high as 20%. It attests to the highly volatile nature of cryptocurrencies, especially Bitcoin, on the Binance crypto exchange.
Leading up to the price surge and liquidity fluctuation was untrue information about the SEC’s approval of the spot BTC ETF. This misinformation caused a shift in liquidity provision, impacted the trading Bitcoin experience, and affected Binance’s liquidity drop.
The sudden spike caused a surge in trading volume and strained the platform’s infrastructure. As a result, it affected its order books and, in turn, significantly raised slippage.
However, the recent report by Kaiko on the liquidity data could also affect the entire crypto market, either positively or negatively.
