August Liquidity Dwindles as Crypto Market Outflows Reach $55B

Crypto Industry Experiences Capital Outflows

A report released by crypto exchange Bitfinex suggests that capital outflows in the crypto industry reached $55 billion in August. The analysis is based on the aggregate realized value metric, which takes into account the realized capital of Bitcoin (BTC) and Ether (ETH) along with the combined supply from the top five stablecoins: Tether (USDT), USD Coin (USDC), Binance USD (BUSD), Dai (DAI) and TrueUSD (TUSD). “A deep dive into the data reveals a prevailing trend: by early August, the industry had begun to experience capital outflows,” notes the report.

The analysis also indicates the return of event-based volatility, where isolated events can have a bigger impact on prices and overall market movements. In August, two isolated events had a significant impact on Bitcoin prices. On Aug. 17, a flash crash resulted in a sell-off of over 11.4% for BTC. Similarly, Grayscale’s partial legal victory over the Securities and Exchange Commission on Aug. 29 resulted in a 7.6% price jump within two hours.

The outflows of capital from the crypto markets did not just affect Bitcoin, but also had an impact on Ether (ETH) and stablecoin liquidity. Hex Crypto, Matic Crypto, Mana Crypto, Pi Crypto, and Polkadot Crypto were among the cryptocurrencies that experienced a decrease in liquidity.

Increased Interest in Crypto Markets

Bitfinex noted that while volatility metrics remain low, the liquidity crunch in the market has allowed isolated events to have a greater impact on market movements. Bitcoin open interest has surged due to heightened institutional interest and wash trading on certain exchanges, according to the analysis. In contrast, Ether futures and options have dropped significantly in 2023, falling to $14.3 billion per day, a decrease of almost 50% from the two-year average.

The open interest of a certain contract, such as Bitcoin futures or options, stands for the total number of open positions, indicating the amount of money invested in Bitcoin derivatives. Bitfinex wrote, “The trajectory seen in the derivatives market, particularly in open interest across both futures and options, mirrors these patterns of low liquidity.”

The crypto markets, including ftm crypto, hex crypto, media network crypto, crypto youtube, matic crypto, hbar crypto, mana crypto, pi crypto, and polkadot crypto, have seen an increase in interest.