The Current State of Bitcoin
The price of Bitcoin (BTC) is currently surging at spot rates, surpassing the July 2023 resistance level and reaching new 2023 highs. This recovery comes after a significant drop in 2022, particularly in November when FTX and Alameda Research collapsed, leading to a sharp sell-off.
Bitcoin Liquidity Levels
According to reports by Kaiko, Bitcoin’s liquidity is currently at the post-FTX collapse level, despite the recent surge in crypto prices. The Alameda gap, which refers to the drop in liquidity following FTX’s bankruptcy, continues to impact market liquidity, even as Bitcoin’s trading volume rises.
Rallying Despite Liquidity Challenges
Bitcoin’s recent rally above the July 2023 high is attributed to fundamental factors and increasing trading volume. However, Kaiko notes that the Alameda gap still persists, contributing to overall market liquidity challenges.
The collapse of FTX and Alameda Research significantly impacted Bitcoin liquidity, with no substantial improvements even as Bitcoin prices doubled from their 2022 lows.
Potential Impact of Spot Bitcoin ETF Approval
Low liquidity continues to pose challenges for Bitcoin traders following the collapse of FTX and Alameda Research. However, there is optimism that the approval of a spot Bitcoin exchange-traded fund (ETF) by the SEC could improve liquidity and drive more institutional interest in the cryptocurrency market.
Hot Take: Potential Rebound with ETF Approval
The potential approval of a spot Bitcoin ETF presents an opportunity for increased liquidity and institutional investment in the cryptocurrency market. While liquidity remains a concern, regulatory clarity and institutional interest could drive significant growth in the coming months if the SEC gives its nod to a spot Bitcoin ETF.
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