Bitcoin liquidity hits 10-month low even with the price surging

livemint.com:

One measure of how easily the largest cryptocurrency can be bought or sold has fallen to 10-month lows, according to Conor Ryder at Kaiko, who summed up the bids and asks within the 2% range of the price on both sides of market maker order books. The liquidity dropoff is happening due to the firms that buy and sell crypto losing access to dollar-payment systems.

“Liquidity on US exchanges and USD pairs in particular have been hardest hit thanks to the banking fears," Ryder said. “It looks as if a big reason for the latest price rally in BTC was due to illiquidity, when depth is low, there is less support to not only the downside but also the upside as well."

The ebb in liquidity has happened as Silvergate Capital Corp. and Signature Bank, which had deep connections to the crypto industry, have folded in recent weeks, with market-watchers on edge for any additional fallout or turbulence. Many digital-asset firms had banked with those lenders, while exchanges had relied on their services for real-time payments, among other things.

“Until some clarity appears in the US, we can probably expect more volatility in the short term, until we get that injection of liquidity that markets need," Ryder said.

The liquidity situation in crypto is worsening after the banking fears this month