Last week, the cryptocurrency market collapsed alongside the stock market and the rest of the world of finance.
After the fallout, cryptocurrency exchanges have been left a ghost town, according to data extracted from order books of top trading platforms.
Cryptocurrency Exchange Order Books Empty, Market is a Ghost Town
Bitcoin and the rest of the cryptocurrency market experienced among one of the worst selloffs in the asset class’s short ten-year history.
The collapse in cryptocurrencies hit alongside historic losses in the stock market, gold, silver, oil, and nearly every other market in the financial world, as investors seek to liquidate their assets into cash to hold through what is the closest event to an apocalypse the world has ever witnessed.
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The madness left the cryptocurrency market in shambles, and order books a ghost town, according to data extracted by one crypto analyst.
The analyst shows a comparison of liquidity in crypto exchange order books prior to the fall from $7,000 to under $5,000, against liquidity post drop to below $5,000.
Talking about low liquidity, this is XBTUSD at 7000s right before the drop, and at 5000s after.
Only orders above $1M are shown, truly a ghost town pic.twitter.com/ooG5wovVCf
— red (@redxbt) March 18, 2020
In the first chart, orders can be seen placed at various levels above and below the price action. In the second chart, nearly all of the orders that were once visible have been pulled.
It’s worth noting that the orders were filtered to only show any with a position size over $1 million or more, so there is still buying and selling activity, however, it is these large market maker type orders that are now missing.
Without liquidity, asset prices move rapidly and with extreme volatility, which is why we’re currently seeing hundred dollar price fluctuations back and forth, without a clear break of any range.
It’s a dangerous environment, as any large-sized orders can clear out what little exists in the order book, tanking prices as a result.
The madness could cause Bitcoin and other cryptocurrency assets to collapse to extreme lows. However, the lack of liquidity works both ways, and massive buy orders could drive up the price of the asset very quickly.
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The one caveat is that this may be a deterrent preventing bigger buyers from taking a position in Bitcoin, as any large buys could wipe out the order book and cause the buyer to pay increasingly higher prices per BTC as they drive the price up against themselves.
On the flip side, any large selling could also be deterred at this point, given the currently low prices and lack of liquidity being a recipe for disaster.
Any large selling at this point would be fueled by cryptocurrency investors willing to take a major loss and risk just to cash out amidst a crisis – however, such a scenario cannot be ruled out during a black swan event steeped in uncertainty.