The Impact of the Alameda Gap on the Crypto Market
A recent research newsletter from crypto research firm Kaiko discussed the ‘Alameda Gap,’ which has had a significant impact on the Bitcoin and crypto market. However, according to Kaiko, this gap is no longer present.
The Alameda Gap refers to the liquidity gap that emerged after the collapse of the defunct crypto exchange FTX and its sister company, Alameda Research. Alameda Research was a prominent market maker that provided substantial liquidity to the market. Following Alameda’s collapse, market makers waited for sentiment and trading activity to recover, resulting in a persistent liquidity gap.
However, Kaiko revealed that as of last week, the market depth has almost fully recovered and is back to its pre-FTX average. The Bitcoin 2% market depth has increased by 40% year-to-date (YTD) and briefly surpassed its pre-FTX average of $470 million. This increase can be attributed to Bitcoin’s price surge since the SEC approved Spot Bitcoin ETFs in January.
Bitcoin’s price has risen about 50% YTD and reached new all-time highs, including a record-breaking $73,750. Additionally, the improvement in liquidity is evident in the decreased cost of trading on major US crypto exchanges such as Coinbase, Kraken, and Bitstamp.
Bitcoin Outperforming Gold
Kaiko’s report also highlighted that Bitcoin is outperforming gold based on the Bitcoin-to-Gold ratio. This ratio measures the relative performance of both assets and is nearing its all-time high (ATH) last seen in November 2021. Despite both Bitcoin and gold reaching ATHs recently, BTC has shown stronger performance.
Furthermore, funds linked to these assets demonstrate Bitcoin’s outperformance. Since their launch in early January, Bitcoin ETFs have attracted $11 billion in investments. In contrast, physically-backed Gold ETFs like SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) have experienced outflows during the same period.
This trend suggests that investors may be shifting towards Bitcoin as a new global store of value. Samson Mow, CEO of Jan3 and a prominent figure in the Bitcoin community, also predicts that people will begin demonetizing gold in favor of BTC.
Hot Take: Bitcoin’s Recovery and Potential
The recovery of market depth and the outperformance of Bitcoin compared to gold indicate positive developments for the cryptocurrency. Here are some key takeaways:
- The Alameda Gap, caused by the collapse of FTX and Alameda Research, no longer exists as market depth has almost fully recovered.
- Bitcoin’s market depth has increased by 40% YTD, surpassing its pre-FTX average.
- Bitcoin’s price surge has led to new all-time highs and a decrease in trading costs on major US crypto exchanges.
- Bitcoin is outperforming gold based on the Bitcoin-to-Gold ratio, attracting significant investments compared to physically-backed Gold ETFs.
- Investors may view Bitcoin as a new global store of value, potentially leading to further growth and adoption.
Overall, these developments indicate a positive trajectory for Bitcoin and its potential as an investment asset. As the crypto market continues to evolve, it will be interesting to see how Bitcoin’s performance compares to traditional assets like gold.
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