Why is altcoin liquidity becoming more concentrated?

Despite the volatility of the past few months, the 1% market depth of altcoins remained relatively stable in Q3, maintaining at $270 million, indicating that market makers are still providing liquidity despite the continued volatility.

Altcoin liquidity was significantly impacted by the FTX and Terra crashes, with liquidity falling by more than 60% between April and December 2022. However, liquidity has gradually improved over the past year, exceeding the average level before the FTX crash in Q1 2024, but fell back in Q3.

However, the recovery of this trend has been uneven by asset class. Liquidity in altcoins has become increasingly concentrated, with large-cap coins outperforming smaller assets.