Crypto Prices Rebounding But Exchanges Still Feeling the Effects of March Sell-off
The world’s leading digital currency is back on the move, up 5.53% BTC/USD is trading around $8,477.
In line with Bitcoin, altcoins have also been spiking this past week, as such adding $30 billion to the overall market. This past month, the market has been only on an incline. However, this full recovery is from the Black Thursday, the day bitcoin crashed over 37% in one of its largest declines ever.
“This was by far the most volatile day in the modern history of Bitcoin,” said Nic Carter, co-founder of Coin Metrics.
While volatility is good for crypto exchanges as high volumes mean they rake in the bulk of money from trading fees, the issue is when the market is flat, as shared by Binance CEO Changpeng Zhao. But this time, it wasn’t so. For some exchanges, it proved to be rather bleak even with prices recovering.
Exchanges take a hit
As we reported, crypto derivatives exchanges BitMEX have lost 32% of its market share since the sell-off and an exodus of 91,000 BTC, worth over $7,00 million.
Other exchanges like Bitfinex also lost their BTC deposits during this time.
As for trading volumes, almost every exchange are on a a downward trend. The daily volume average for popular derivatives exchanges like BitMEX, Huobi and OKEx, are down from thirty percent from last month to sixty percent in April. As per CryptoCompare, daily volume on average for spot exchanges are also down around 10%.
The price dump “makes us very worried, and it’s not a good thing for the exchange,” said Huobi Groups vice president of global business Ciara Sun. March’s violent sell-off resulted in Huobi liquidating 10,000 leveraged users’ positions. She told Bloomberg,
“When people get hurt and get liquidated, it means we lost a lot of customers. And it hurts the whole ecosystem. Some customers, when they get liquidated, definitely need time. Others will not come back.”
While Huobi seeing a number of large institutional traders, and smaller retailers holding no more than 1 bitcoin since the crash, holding between 10k and 100k BTC has also seen a sharp drop. However, while the price is surging, daily active traders and the number of newly registered users decreased in April versus January and February.
“Overall liquidity is down a fair bit, and everyone has to contend with that,” said Sam Bankman-Fried, CEO of FTX. “Volatility is up a fair bit, so a lot of people are providing less than they used to.”
Exchange Infrastructure still fragile
The March sell-off also highlighted the infrastructure issues as that day when BTC price went the lowest on BitMEX at $3,600, the exchange reported two denial-of-service attacks. As such exchanges have taken to beef up their infrastructure.
Huobi instituted a circuit breaker and began doing partial liquidations. Binance is also one of them as Zhao said,
“We are changing a lot of our internal systems, just to be very cautious and conservative and be safe about it. The No. 1 thing we are focused on right now is just to increase system capacity.”
However just today, Binance’s CZ said: “Chinese domains experienced targeted DDoS attacks.” So, for now, the infrastructure of these exchanges remains “inherently fragile.”
Binance meanwhile saw more new user signups than February, “by far’, and also captured BitMEX’s share.
“It’s possible users from other exchanges are moving to our platform,” Zhao said.