Bitcoin crossed the $68,000 mark during the weekend after President Joe Biden announced his exit from the presidential race for the upcoming elections in November 2024.

The event showed just how sensitive the global crypto market is to US political events. The discrepancy between America’s influence on the global crypto market and its share of the global market becomes evident when analyzing trading volumes.

Kaiko data shows that the market share of US exchanges in terms of trading volume currently stands at 11.79%. Global exchanges, on the other hand, dominate with 88.12%.

The disparity shows that almost all crypto trading activity on centralized exchanges happens outside the US. While numerous reasons have contributed to this discrepancy, the regulatory environment in the US stands out as the most significant factor.

The regulatory landscape in the country is much harsher compared to other regions. The SEC’s strict oversight and enforcement actions have led to cautious participation by retail and institutional investors. US-based exchanges have had to implement rigorous compliance measures that differ from state to state, deterring a large portion of retail traders.

However, despite the low volume share, the US accounts for almost half of the market’s liquidity. Kaiko data shows that US-based exchanges account for a substantial 45.09% of the global market depth at the 2% level.

Market depth shows the market’s general ability to sustain relatively large orders without significantly impacting price. This is an important metric as it acts as an indicator of overall liquidity. A deep market with substantial orders within the 2% range shows that large orders can occur without causing significant price fluctuations. This high liquidity then helps reduce price volatility, which is particularly important for institutional investors who deal with large buy and sell orders.

High liquidity in the US can be attributed to the large presence of institutional investors. Their presence has increased drastically since the launch of spot Bitcoin ETFs this year, as these products contribute to higher liquidity and deeper order books on exchanges where these ETFs are traded or tracked.

The creation and redemption processes of spot Bitcoin ETFs involve large-scale transactions in the underlying Bitcoin market. When new ETF shares are created, authorized participants (usually exchanges like Coinbase) purchase the equivalent amount of Bitcoin from the market, contributing to market depth. Conversely, when ETF shares are redeemed, the underlying Bitcoin is sold, further adding to the liquidity and depth of the market.

The sheer size of this market is why news coming from the US can move Bitcoin’s price less than 8% away from its ATH despite accounting for such a small share of volume.

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Tracking changes in liquidity is equally important as monitoring changes in Bitcoin‘s on-chain data. Each price movement, be it up or down, exerts significant pressure on liquidity. One way to analyze changes price swings bring to the market is to look at market depth.

The aggregated 2% market depth and the 2% bid vs. ask depth are excellent indicators of market liquidity and sentiment for Bitcoin. The aggregated market depth represents the combined value of buy and sell orders within a 2% range of the current price. It provides insight into how much BTC can be traded without causing significant price movements. On June 2, the aggregated market depth was $411.83 million across centralized exchanges tracked by Kaiko. The depth spiked to $473.97 million on June 4, the highest in the past two months.

The spike in market depth followed Bitcoin’s price increase from $67,750 to $70,600. While this might not be a significant percentage increase, $70,000 is an especially important psychological milestone. This spike becomes even more significant when accounting for the fact that BTC spent weeks in the mid $60,000 range.

The bid vs. ask depth shows the value of buy and sell orders within the same 2%. This spread also saw a notable increase over the past couple of days. On June 2, there were $202.40 million in bids and $209.44 million in asks. This aligns with previous CryptoSlate analysis, which found the market almost equally split between buying and selling.

By June 4, the bids had increased to $219.06 million, and the asks had risen sharply to $254.91 million, resulting in the largest spread between asks and bids since early April. This increase in both market depth and bid vs. ask depth shows heightened market activity.

The rise in aggregated market depth suggests that the market can handle larger trades with less impact on price. This is a clear sign of greater liquidity in the market. This higher liquidity means traders can execute substantial transactions without causing significant price fluctuations, contributing to overall market stability. The simultaneous increase in bid and ask depth reflects the increased activity and confidence among traders. More buy and sell orders within the 2% range show that traders are more actively participating in the market.

The larger increase in ask depth compared to bid depth implies that sellers are setting higher prices, anticipating continued price gains. This sentiment is supported by the substantial rise in bid depth, indicating strong demand for Bitcoin at higher price levels. As more buyers enter the market, willing to purchase at these elevated prices, the market’s upward momentum is reinforced. The increased liquidity, coupled with higher bid and ask values, paints a picture of a robust trading environment where large trades can be executed with minimal impact on the price.

A significant portion of this activity resulted from spot Bitcoin ETFs. Farside data showed that spot Bitcoin ETFs saw $886.6 million in inflows on June 4, making it the second-largest day of inflows since launch. CryptoSlate reported that this was the largest inflow ever for a day when no US ETF recorded an outflow, including GBTC. The larger spread between asks and bids suggests that sellers anticipate continued price increases, setting higher prices accordingly. The increased liquidity supports price stability, making the market more attractive to institutional investors and large traders. The growing institutional interest, evidenced by the rise in ETF inflows, cements the demand for Bitcoin, contributing to the potential for sustained price gains in the coming months.

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