Crypto research firm Hyblock Capital’s global bid and ask indicator, which tracks the dollar amount of resting bid and ask orders for more than 1,100 coins listed worldwide, fell by 20% across spot markets on Saturday. This sharp decline was likely caused by market makers pulling out from the market during the altcoin crash, according to Joe McCann, CIO of crypto hedge fund Assymetric. McCann tweeted, The @hyblockcapital Global Bid/Ask metric dropped a full 20% during the collapse. Seems like a bunch of MMs [market makers] pulled inventory creating paper-thin order books. Thin liquidity means traders might struggle to execute large orders at stable prices, and a bunch of small orders can have an outsized impact on the going market rate.
The decline in liquidity could lead to above-average volatility following the U.S. inflation data release and the Federal Reserve rate decision. The U.S. consumer price index is scheduled for release on Tuesday at 12:30 UTC and the Fed is expected to maintain a status quo in policy rates on Wednesday at 18:00 UTC, per Reuters data from FXStreet.
The crypto market liquidity tanked sharply over the weekend, leaving order books with paper-thin liquidity that could amplify price swings. This could have a significant impact on traders’ ability to execute large orders at stable prices.