Last week, the U.S. Federal Reserve (Fed) unexpectedly initiated a monetary easing cycle with a substantial rate cut of 50 basis points. The Fed also hinted at two more rate cuts within the year. This move has reignited hopes for a soft landing for the U.S. economy, where economic growth slows without leading to a recession. In response, both U.S. stocks and Bitcoin experienced significant increases following the Federal Open Market Committee (FOMC) meeting, with Bitcoin’s price rising 5.2% within 24 hours of the announcement.
The CVD (Cumulative Volume Delta) of Bitcoin, which measures net buying and selling pressure in the spot market, surged immediately after the Fed’s press release at 18:00 UTC on September 18. As Asian markets opened around 23:00 UTC, buying pressure from offshore exchanges intensified.
Moderate capital inflows were observed in the derivatives market. From September 16 to 19, Bitcoin’s open interest on platforms like Bybit, OKX, and Binance increased by approximately 12%, reaching $12 billion.
The U.S. central bank is not the first major central bank to cut rates this year. The European Central Bank (ECB) and the Bank of England (BoE) already implemented rate cuts earlier this summer. However, the market impact of these rate cuts was relatively mild, with Bitcoin prices actually declining in the days following the ECB and BoE announcements.
Why did the market react so strongly to the Fed’s decision?
Lower U.S. interest rates typically lead to a weaker dollar. As the dollar is the primary quoting asset for Bitcoin (BTC), a weaker dollar generally pushes up Bitcoin’s price in dollar terms. In recent years, the trading volume of the dollar and dollar-backed stablecoins has steadily increased, reaching a historical high of 93% last month.
Moreover, the Fed’s accommodative monetary policy also enhances dollar liquidity in global markets, prompting investors to seek higher-yielding alternative assets such as Bitcoin.
Notably, the historical negative correlation between the dollar and Bitcoin has weakened over the past month. In August, both Bitcoin and the Dollar Index (DXY) fell, indicating that other factors are also influencing the price movements of these two assets. One such factor is the upcoming U.S. presidential election, with former President Donald Trump currently regarded as a candidate favorable to both the dollar and Bitcoin.
Data Highlights:
Wallets associated with Alameda Research are consolidating assets. Reports suggest that cryptocurrency wallets linked to the FTX affiliate Alameda Research have been actively transferring funds over the past month, raising speculation that the bankruptcy estate of FTX may be consolidating assets to prepare for creditor repayments. Earlier this year, FTX announced that it had recovered enough tokens to fully repay most creditors based on the asset values at the time of its bankruptcy filing. The exchange is expected to commence repayments after the final approval of its liquidation plan in early October.
Using Kaiko’s cryptocurrency wallet data solutions, we investigated the fund flows of a wallet (address: 0xf02e86d9e0efd57ad034faf52201b79917fe0713). Over the past month, this wallet transferred $1.6 million worth of ETH to the cryptocurrency custody platform BitGo and $220,000 worth of World Coin (WLD) to Binance.
Transferring assets to exchanges is typically viewed as a bearish signal, as traders often move assets to exchanges for the purpose of selling. Alameda Research is an early investor in Worldcoin, holding 75 million WLD tokens (valued at $118 million). Since July, these tokens have been gradually unlocked by Worldcoin’s developer Tools for Humanity (TFH).
A deeper analysis of the wallet’s fund inflows indicates that it consolidates assets through multiple smaller wallets, which are likely owned by Alameda Research, with the largest inflow being $1.27 million USDT from OKX.
As of September 18, Alameda’s wallet still holds $64 million worth of WLD tokens. Selling these tokens could significantly impact the price, especially given that the price has already dropped by 30% since the tokens were unlocked on July 24. Other major holdings include several illiquid small-cap tokens, such as FTX’s FTT (valued at $13 million) and Bona Network’s BOBA (valued at $9 million), both of which have market depths of only $700,000 daily.
Due to turbulence in the U.S. market, traders are turning to Crypto.com. This year, the landscape for cryptocurrency exchanges in the U.S. has shifted due to regulatory changes and market structure developments. Cboe Digital ceased its spot trading operations for digital assets in June, focusing on derivatives, a decision it announced back in April.
Since June, Crypto.com has seen a significant increase in trading volume and market share, suggesting it may have benefited from the closure of Cboe Digital. Trading volume has surged, and liquidity has increased correspondingly. During the summer, the exchange’s Bitcoin 1% market depth rose sharply, surpassing Gemini and challenging Coinbase’s liquidity. Coinbase even lost market share in the third quarter.
Additionally, Crypto.com’s competitive fee structure may have further boosted trading activity on the platform. The exchange currently waives maker fees for VIP-level clients and has launched other promotional initiatives. Furthermore, Crypto.com’s fees are generally more competitive compared to other U.S. exchanges.
The synchronous increase in liquidity and trading volume indicates that market makers have also become more active on Crypto.com. The growth in average trade size on the exchange is another sign that it may have gained more trading volume from Cboe’s closure.
When observing the trading activity of BTC, ETH, and USDT on weekdays, trading volume has steadily increased since March, with a noticeable spike during the summer. Since Cboe is an institution-focused trading platform, its average trade size is significantly higher than that of most retail platforms. The increase in trade size on Crypto.com suggests a rise in institutional activity.
Why is liquidity in altcoins becoming increasingly concentrated?
Despite significant volatility over the past few months, the 1% market depth of altcoins remained relatively stable in the third quarter at $270 million, indicating that market makers continue to provide liquidity despite ongoing volatility.
The liquidity of altcoins has been significantly impacted by the collapses of FTX and Terra, with liquidity declining by over 60% from April to December 2022. However, liquidity has gradually improved over the past year, surpassing the average levels prior to the FTX collapse in the first quarter of 2024, though it has declined again in the third quarter.
Nevertheless, the recovery trend is not uniform across asset classes. Liquidity in altcoins is increasingly concentrated, with larger coins performing more prominently relative to smaller assets.
As of early September, the top ten altcoins by market capitalization accounted for 60% of total market depth, up from approximately 50% in early 2022. In contrast, the market share of the top 20 altcoins sharply decreased during the same period, from 27% to 14%.
Moreover, liquidity in altcoins is becoming increasingly concentrated in offshore exchanges. These exchanges now account for 69% of the total altcoin depth, up from 55% in early 2022, a trend largely driven by large- and mid-cap altcoins.
We have observed an opposite trend in Bitcoin liquidity, with the share of U.S. exchanges relative to offshore markets increasing. This suggests that some market makers may have reduced portfolio risks or shifted their focus to Bitcoin.
2024 Exchange Listings Cooling
The intensifying global regulatory scrutiny has significantly altered the listing strategies of cryptocurrency exchanges, leading to a noticeable slowdown in the number of new listings compared to the bull market of 2021.
However, focusing solely on the nominal number of new listings does not fully reflect how exchanges are expanding their product lines. To provide a clearer perspective, we compared the number of new listings to the total number of active trading pairs on each exchange.
In 2024, Binance added over 300 trading pairs, ranking second only to MEXC. However, these new trading pairs only account for 27% of its total products, lagging behind Bybit, Poloniex, and OKX in terms of listing expansion.
U.S.-based exchanges have been more conservative, with newly listed trading pairs accounting for only 4% to 15% of their existing products. For example, Coinbase introduced only 29 new trading pairs in 2024, a tenfold decrease compared to 2021.
Overall, the new listings on major exchanges this year account for only about 20% of existing trading pairs, a substantial decline from the average of 50% during the peak in 2021.
The U.S. Presidential Election Triggers Volatility in the Crypto Market
Digital assets have become an increasingly prominent topic among the two main U.S. presidential candidates. Former President Trump pledged months ago to support Bitcoin and its related fields, planning to launch his own cryptocurrency project in the coming weeks. Many market participants view this Republican candidate’s support for Bitcoin as a positive sign.
However, this could also be a double-edged sword, as demonstrated by recent debates. During the debates, Bitcoin’s price fell, with the market reacting poorly to the performances of Trump and Harris.
Before the debate, the implied volatility of Bitcoin options for November 8 on Deribit surged, with these contracts expiring just three days after the U.S. vote. During the debate, the trading volume of special election contracts soared to over $40 million, with traders primarily purchasing put options, profiting as Bitcoin’s price declined.
The U.S. election may continue to be a source of heightened market volatility in the coming weeks, as we enter the final stage of the election cycle. Although Bitcoin and digital assets did not take center stage during the 2020 campaign, their significance is increasingly rising this time. Former President Donald Trump has made his stance clear, pledging support for digital assets in the U.S. and speaking at the Bitcoin conference in August. While Kamala Harris has expressed less support for digital assets, the current Vice President indicated at a fundraising event on Sunday that she would support innovations in digital assets
