The first Crypto Long & Short of 2021 has a different format: Instead of the usual article, I’ve asked some leading industry analysts – from Kaiko, IntoTheBlock, skew.com and Arcane Crypto – to share their favorite charts with you. The depth and quality of metrics available to market observers has grown by leaps and bounds this year, and the work of these analysts and others goes a long way toward helping investors to not only understand the crypto ecosystem better, but also to appreciate how different and fascinating the assets and their markets are. Click on the below links to find out more about these analysts’ work and the data they offer.
Clara Medalie, Business Development and Strategy at Kaiko
The March market crash will go down in history as one of the steepest and most rapid sell-offs to ever sweep cryptocurrency markets. Over the course of an hour, bitcoin‘s price plummeted thousands of dollars and order book liquidity all but evaporated. This chart shows the sum of all bids and asks placed on Coinbase’s BTC-USD order book before, during and after the first price crash. We can observe that when the crash began around 10:30am, the quantity of orders surrounding the midprice plummeted, forcing a liquidity crisis that perpetuated the steep fall in price.
This chart is one of my favorites because it demonstrates the important role that market makers play in creating and maintaining liquidity in cryptocurrency markets. Ultimately, the March crash proved that the price of an asset is often less a reflection of the “true value at a point in time assigned through the process of market-based price discovery” and more a product of relentless feedback loops triggered by automatic liquidations and decimated order book depth. As cryptocurrency markets mature and order book liquidity improves, we can expect the magnitude and frequency of such price crashes to decrease.
Lucas Outumuro, Senior Analyst at IntoTheBlock