Crypto market outflows reached $55B in August as liquidity dwindled — Bitfinex

Recent data from Bitfinex reveals a significant capital exodus from the cryptocurrency market, with a whopping $55 billion leaving in August. Bitfinex’s analysis, which utilizes the aggregate realized value metric, tracks the realized capital of both Bitcoin and Ether while considering the combined supply of the top five stablecoins: USDT, USDC, BUSD, DAI, and TrueUSD (TUSD).

The report highlights a prevailing trend that started emerging in early August, indicating a growing movement of capital out of the industry. This outflow wasn’t limited to Bitcoin; it also affected Ether and the liquidity of stablecoins.

Bitfinex observed, “August was the largest red monthly candle for BTC since the bear market bottom was formed in November 2022 at -11.29 percent as per Bitfinex Data.”

Furthermore, the analysis suggests the resurgence of event-based volatility, where isolated incidents can wield a substantial influence on prices and overall market dynamics. During August, two such events had a notable impact on Bitcoin’s price. On August 17, a flash crash led to a BTC sell-off of over 11.4%. Likewise, Grayscale’s partial legal victory against the Securities and Exchange Commission on August 29 triggered a 7.6% price surge within just two hours.

Bitfinex commented, “We believe that while volatility metrics continue to be low, the liquidity crunch in the market has allowed isolated events to have a bigger impact on market movements.”

The analysis also underscores the strong performance of Bitcoin open interest compared to the broader crypto market. This is attributed to heightened institutional interest and reported wash trading on some exchanges. In contrast, Ether futures and options have witnessed a significant decline in 2023, plummeting to $14.3 billion per day, marking a nearly 50% drop from the two-year average.

Open interest, which reflects the total number of active positions in specific contracts, provides insight into the amount of capital currently invested in Bitcoin derivatives.

Bitfinex summed up the situation by stating, “The trajectory seen in the derivatives market, particularly in open interest across both futures and options, mirrors these patterns of low liquidity.”

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