Why is altcoin liquidity becoming more concentrated?
Although the altcoin market has been volatile in recent months, the market depth in the third quarter was relatively stable, remaining at around $270 million. This shows that market makers are still working hard to provide liquidity even in the market volatility.
However, altcoin liquidity was previously greatly affected by the collapse of FTX and Terra, and liquidity fell by more than 60% from April to December 2022. But over the past year, liquidity has gradually recovered, exceeding the average level before the FTX collapse in the first quarter of 2024, only to fall back slightly in the third quarter.
The recovery of altcoin liquidity is not uniform. Now, altcoin liquidity is increasingly concentrated in large currencies, and the performance of small assets is not so prominent. By early September, the top ten altcoins by market value accounted for 60% of the total market depth, while this proportion was about 50% in early 2022. At the same time, the market share of the top 20 altcoins has dropped from 27% to 14%.
The liquidity of altcoins is also increasingly concentrated in offshore exchanges. The share of these exchanges in total altcoin depth has risen from 55% at the beginning of 2022 to 69%, with large and medium-cap altcoins driving this trend. At the same time, Bitcoin's liquidity trend is the opposite, with US exchanges increasing their share relative to offshore markets. This may indicate that some market makers have reduced portfolio risk or turned to Bitcoin.
