Crypto Liquidity Remains Hollow After October Crash, Risking Sharp Price Swings
The October leverage wipeout has left Bitcoin (BTC) and Ethereum (ETH) market depth structurally thin on centralized exchanges, with order-book depth significantly below early October levels. This indicates a pullback by market makers. Despite a rapid post-panic recovery in depth for altcoins such as Solana (SOL), XRP, Cosmos (ATOM), and Ethereum Name Service (ENS), liquidity across key price bands remains below pre-washout levels.
CoinDesk Research shows that order-book depth on major centralized venues remains structurally lower, reflecting a cautious market-making environment as year-end approaches. This thin liquidity raises the likelihood of outsized price swings, where routine trading flows and macroeconomic developments could trigger exaggerated moves.
Specifically, BTC depth at 1% from mid-price fell from about $20 million in early October to about $14 million by November 11. Depth at the 0.5% band decreased from approximately $15.5 million to just under $10 million, and 5% depth dropped from over $40 million to just under $30 million. Similarly, ETH depth at 1% from mid-price dropped from just above $8 million on October 9 to just under $6 million in early November, with similar declines observed at 0.5% and 5% bands.
Altcoin depth at 1% for SOL, XRP, ATOM, and ENS dropped from roughly $2.5 million to about $1.3 million during the panic. Although there was a partial rebound, liquidity remains about $1 million below early October levels across bands.
Macro flows have contributed to reduced market-making appetite. CoinShares reported $360 million in net outflows from digital asset investment products in the week ending November 1, including nearly $1 billion from bitcoin ETFs. The United States accounted for more than $430 million of these outflows, which are tied to Federal Reserve rate expectations.
With open interest and liquidity thinner, smaller shocks can more easily trigger liquidations. Even if open interest rebuilds during calmer periods, the lack of resting liquidity could still fuel outsized price moves both upward and downward as the year ends.
