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Binance.US liquidity dried up! Market depth has dropped by 76%, assets outflow by 20%

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Binance.US liquidity dried up! Market depth has dropped by 76%, assets outflow by 20%

Following the SEC lawsuit against Binance, market depth on Binance.US has decreased by 76% as market makers continue to exit. According to The Block's report, Wintermute and Keyrock openly admitted to being two of the market makers exiting Binance.US.

What is Market Depth?

Market depth refers to the ability of the financial market to absorb a relatively large amount of market orders without significantly affecting the price. Market depth considers the overall level and breadth of the market, which includes the quantity and size of buyers and sellers in the market. The higher the market depth, the higher the market liquidity, and the smaller the price fluctuations.

There is no unified standard for calculating market depth, but there are some commonly used indicators that can reflect the situation of market depth, such as bid-ask spread, trading volume, order book depth, etc.

Huobi US Market Depth Plummets, Significantly Higher Than Huobi Global and Coinbase

According to a report by cryptocurrency data firm Kaiko, the market depth of Huobi US has dropped by 76% following the SEC lawsuit. The day before the lawsuit, the market depth was $34 million, now reduced to only $7 million. Kaiko attributes the sharp decline in market depth to market makers swiftly leaving the Binance.US platform after the lawsuit, sparking concerns about liquidity and future uncertainties.

Comparing the data of Coinbase and Huobi Global, although their market depths have also decreased, the difference in magnitude is significant, with Coinbase dropping by approximately 16% and Huobi Global dropping by around 7%.

Impact of Decreased Market Depth on Huobi

The significant decrease in market depth has raised concerns among traders who rely on good liquidity to execute trades. As the availability of buy and sell orders diminishes, traders may face increased slippage and potential difficulties in obtaining the desired trade execution prices.

In simple terms, it means worsened prices and an increased likelihood of unfulfilled trades, especially for whales, the decreased market depth significantly increases trading risks. A lack of liquidity can weaken the overall efficiency and attractiveness of the exchange, potentially further damaging its reputation and user acquisition capabilities.

Additionally, according to data from the cryptocurrency data platform Watchers, in the past 7 days, Huobi Global has experienced a net outflow of over $1.16 billion, approximately 2.5% of the platform's total assets, while Binance.US has seen an outflow of over $124 million, about 20% of the platform's total assets.

Looking at the outflow proportion, the outflow proportion of Huobi Global is not high, which should not affect the platform operation. The noteworthy point is Binance.US, with a clear 20% outflow proportion indicating user panic, and the transformation of Binance.US into a pure "cryptocurrency" exchange may also have an impact on fund outflows.

However, Huobi CEO CZ pointed out last Saturday that some erroneous estimation methods on third-party platforms online could lead to misunderstandings. For example, some websites calculate the change in asset value in USD, attributing the decrease in token prices to the reduction in asset size, or only account for fund outflows without considering inflows.