Coinbase and Cumberland are assuring customers that the recent SEC lawsuit against Cumberland has not affected Bitcoin liquidity on the platform. Reports of a decline in BTC market depth were downplayed by both companies, with Coinbase stating that there has been no significant change in BTC-USD depth at 2% throughout October.
A report by Kaiko, a Paris-based firm, highlighted a notable drop in 2% BTC market depth on Coinbase after the SEC charged Cumberland for operating as an unregistered dealer in over $2 billion worth of crypto assets. The decline in market depth on Oct. 10 caused concern, as a smaller order size could potentially move the spot price by 2% in either direction.
The 2% market depth is crucial for assessing liquidity and the market’s ability to handle large trading orders with minimal slippage. Kaiko noted that while the ask-side depth decreased, bid depth for buy orders increased, indicating that market makers were adjusting their positions in anticipation of a price decline.
Despite the initial drop in liquidity, Kaiko mentioned that the market has since recovered, suggesting that the decrease in ask-side liquidity may have been a result of shifting market expectations. Other exchanges also experienced a drop in liquidity following the SEC lawsuit, but overall liquidity on U.S. exchanges has started to improve.
Cumberland responded to the analysis by emphasizing that they have not made any changes to their business operations or the assets in which they provide liquidity as a result of the SEC’s actions. The company’s statement aimed to reassure customers that their activities remain unaffected by the lawsuit.
It is essential for cryptocurrency exchanges to maintain stable liquidity levels to ensure smooth trading operations and price stability. The recent fluctuations in BTC market depth on Coinbase serve as a reminder of the impact that regulatory actions can have on the crypto market. Investors and traders will be closely monitoring the situation to assess any potential long-term effects on Bitcoin’s liquidity and market dynamics.