The regulatory crackdown in the United States has proven to be advantageous for global exchanges. However, the past year has presented a challenge in terms of liquidity for crypto assets following the collapse of FTX. The Signet and SEN fiat settlement networks’ shutdowns in the U.S. had a consequential effect on market makers’ operational efficiency. There has been a dip in the 2% market depth for ETH since March, and it has yet to fully recover to pre-FTX levels. Conversely, the .1% depth, which allows for immediate liquidity measuring around the mid-price, has returned to levels seen prior to the FTX collapse.
Ever since FTX’s collapse, order book liquidity pertained only to a select few exchanges. Binance, Bitfinex, OKX, Coinbase, and Kraken account for 72% of the ETH market depth. The remaining 41 exchanges only make up 28% of market depth- whereas, previously, FTX and its counterpart contributed to nearly 40%. Although liquidity has been increasingly concentrated across a limited subset of exchanges, it has been less U.S.-based in the past year.
Market makers, seeking to avoid uncertainty, have been attracted to global exchanges due to the regulatory crackdown. The continued consolidation of liquidity on select exchanges for all assets, not merely ETH, may be expected going forward, given the exchange space’s struggle to entice market makers amidst an ongoing bear market.