Trading Crypto on Binance Becomes Challenging as Order Book Liquidity Tanks 25%
The loss of Binance’s CEO and the leading digital assets exchange’s $4 billion settlement of U.S. criminal charges on Tuesday failed to destabilize the wider crypto market in a big way. It has, however, impacted Binance’s order book liquidity, complicating trading conditions for large traders.
Liquidity for top cryptocurrencies on the exchange, measured by 0.1% and 1% market depth indicators, has declined by 25% or more to less than $150 million and around $180 million, respectively, in the past 24 hours, data tracked by Kaiko show. Market depth is a collection of buy and sell orders within a certain percent of the mid-price, or the average of the bid and the ask prices.
In other words, moving the market by 0.1% and 1% in either direction is now 25% easier than it was 24 hours ago. It also means trading large orders on Binance at stable prices has become tougher, exposing so-called whales to slippage, that is movement between the price quoted when a trader places the order and what they actually pay when the order is filled.
As of now, it’s still being determined whether the liquidity has moved to other exchanges.
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On Tuesday, Binance founder Changpeng “CZ” Zhao stepped down as CEO and pleaded guilty as part of the U.S. settlement. Since then, users have withdrawn almost $1 billion in funds from the exchange.
Bitcoin (BTC), the biggest cryptocurrency by market value, dropped nearly 4% to $35,700 late Tuesday only to bounce back to $36,500 at press time.
Edited by Sheldon Reback.