As a reminder, liquidity is the property of an asset to be sold quickly enough at the market price without a significant change in the market price. The most liquid cryptocurrencies because of their popularity are Bitcoin and Etherium. This means that buying or selling these coins in large volumes will not significantly affect their value, which attracts large investors.

Illiquid crypto-assets are traditionally considered to be various meme-tokens. At times, such coins can lose more than 50 percent of their value in a 24-hour period. Typically, this is caused by sales by investors who managed to purchase large volumes of the asset before its massive growth.

What’s going on with Bitcoin?

According to Kaiko analyst Dessislava Obert, Bitcoin’s liquidity on Binance has dropped from $45 million to $16 million since February this year. The expert cites the following chart to make it clear. Above, it shows the so-called BTC market depth – that is, the amount of transactions that will change the BTC exchange rate by 1 percent in one direction or another.

As you can see, the figure was affected by the collapse of major banks such as Silvergate, Silicon Valley Bank, Signature and First Republic Bank. The trading volumes with BTC are shown below.

Simply put, the more buyers and sellers there are on the exchange, the more efficiently the market processes their bids. The higher the liquidity, the more money a trader needs to spend to change the BTC price by 1%. And now the situation with these figures is getting worse.

According to Decrypt’s sources, the main reason for the decline in trading volumes was the cancellation of zero commissions for 13 different Bitcoin trading pairs. This action continued on Binance for almost ten months until March 22, 2023. After its cancellation, many large traders and market makers decided to leave the exchange, as their profitability decreased significantly.

Recall, a market maker is a market participant that trades by opening deals that are opposite to each other. This way he does not lose money, as one deal essentially insures the other. In this case, the market maker by its actions allows other traders to trade and receives a certain percentage for his services. Most often, market makers are specialized firms that cooperate with trading platforms.

Due to the departure of market makers, monthly trading volume in the most traded BTC-USDT pair on Binance dropped from $16 billion in March to $2 billion in April. Obert also added that the decline in liquidity “became more pronounced” after a series of collapses by US banks that were actively partnering with cryptocurrency companies.

The consequence of the decline in liquidity can be seen in Bitcoin’s increased volatility. A related metric shows new local records on Kaiko indicators.

The logic here is simple: the worse the liquidity, the less money is needed to open a trade that will move the cryptocurrency's exchange rate by a certain percentage. Consequently, it becomes much easier to influence coin rates.

Also, the lack of liquidity prevents the creation of a base for new sustainable growth in the industry. Earlier this week, positive US inflation data was released, but due to a lack of trading activity in BTC, the cryptocurrency’s value failed to consolidate at the new $28,000 milestone after the initial rebound.

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That said, today it takes 10,000 bitcoins to make it into the top 100 richest Bitcoin addresses. The figure was the same in mid-April, which means big investors are not particularly active in changing their own balances and making transactions in digital assets. Apparently, they are waiting for a new bullpen to arrive.

At the same time, the number of addresses with at least 1 BTC has surpassed the one million unit mark for the first time in the cryptocurrency’s history.

Meanwhile, the US division of a major cryptocurrency exchange called Binance.US is looking for ways to reduce the influence of Binance chief Changpen Zhao in the branch. This is not an accidental decision, as Zhao has been gradually receding into the background among Binance.US’s major owners since last summer.

The reason for what is happening is the continued pressure from US regulators on the crypto industry. Recall, earlier the Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance and Zhao, putting up quite an impressive list of charges. You can read more about this case in our previous article.

Senior executives at Binance.US are worried that Zhao’s identity could cause further problems for the US division of the cryptocurrency exchange. That is, regulators may not grant them additional licenses, sue them, and so on. Nevertheless, Zhao himself denies any fallout against himself and his exchange. However, in the current case such a decision would probably be the most appropriate.


Bitcoin's liquidity situation is not good news. After all, the decline in this indicator makes the first cryptocurrency more vulnerable to serious collapses, which also affects all coins in the niche. However, it is important to understand that the deterioration in liquidity is also a consequence of the mass withdrawal of coins outside of centralised exchanges. And if we're talking about non-custodial hardware wallets for long-term storage of digital assets here, that's a good trend.


Look for even more interesting stuff on the topic in our cryptochat. There we discuss other important news affecting the digital asset industry in one way or another.