US moves global markets because of liquidity, not volume

Bitcoin
crossed
the
$68,000
mark
during
the
weekend
after
President
Joe
Biden
announced
his
exit
from
the
presidential
race
for
the
upcoming
elections
in
November
2024.

The
event
showed
just
how
sensitive
the
global
crypto
market
is
to
US
political
events.
The
discrepancy
between
America’s influence
on
the
global
crypto
market
and
its
share
of
the
global
market
becomes
evident
when
analyzing
trading
volumes.

Kaiko
data
shows
that
the
market
share
of
US
exchanges
in
terms
of
trading
volume
currently
stands
at
11.79%.
Global
exchanges,
on
the
other
hand,
dominate
with
88.12%.

The
disparity
shows
that
almost
all
crypto
trading
activity
on
centralized
exchanges
happens
outside
the
US.
While
numerous
reasons
have
contributed
to
this
discrepancy,
the
regulatory
environment
in
the
US
stands
out
as
the
most
significant
factor.

The
regulatory
landscape
in
the
country
is
much
harsher
compared
to
other
regions.
The
SEC’s
strict
oversight
and
enforcement
actions
have
led
to
cautious
participation
by
retail
and
institutional
investors.
US-based
exchanges
have
had
to
implement
rigorous
compliance
measures
that
differ
from
state
to
state,
deterring
a
large
portion
of
retail
traders.

However,
despite
the
low
volume
share,
the
US
accounts
for
almost
half
of
the
market’s
liquidity.
Kaiko
data
shows
that
US-based
exchanges
account
for
a
substantial
45.09%
of
the
global
market
depth
at
the
2%
level.

Market
depth
shows
the
market’s
general
ability
to
sustain
relatively
large
orders
without
significantly
impacting
price.
This
is
an
important
metric
as
it
acts
as
an
indicator
of
overall
liquidity.
A
deep
market
with
substantial
orders
within
the
2%
range
shows
that
large
orders
can
occur
without
causing
significant
price
fluctuations.
This
high
liquidity
then
helps
reduce
price
volatility,
which
is
particularly
important
for
institutional
investors
who
deal
with
large
buy
and
sell
orders.

High
liquidity
in
the
US
can
be
attributed
to
the
large
presence
of
institutional
investors.
Their
presence
has
increased
drastically
since
the
launch
of
spot
Bitcoin
ETFs
this
year,
as
these
products
contribute
to
higher
liquidity
and
deeper
order
books
on
exchanges
where
these
ETFs
are
traded
or
tracked.

ADVERTISEMENT

The
creation
and
redemption
processes
of
spot
Bitcoin
ETFs
involve
large-scale
transactions
in
the
underlying
Bitcoin
market. When
new
ETF
shares
are
created,
authorized
participants
(usually
exchanges
like
Coinbase)
purchase
the
equivalent
amount
of
Bitcoin
from
the
market,
contributing
to
market
depth. Conversely,
when
ETF
shares
are
redeemed,
the
underlying
Bitcoin
is
sold,
further
adding
to
the
liquidity
and
depth
of
the
market.

The
sheer
size
of
this
market
is
why
news
coming
from
the
US
can
move
Bitcoin’s
price
less
than
8%
away
from
its
ATH
despite
accounting
for
such
a
small
share
of
volume.

The
post
US
moves
global
markets
because
of
liquidity,
not
volume
appeared
first
on
CryptoSlate.

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