Bitcoin (BTC-USD) has dropped to under $16K as the broader cryptocurrency space comes under increased pressure from the implosion of centralized crypto exchange FTX. The bearish price action also comes in the wake of risk-off trading in the stock market.
The digital token, known for its exceptional volatility, slid 4.5% to $15.77K as of 3:15 p.m. ET, compared with its November 2021 peak of $68.9K. Ethereum (ETH-USD), the world's largest altcoin, tanked 6.4% to $1.10K, and other major cryptos like binance coin (BNB-USD) -6.7%, cardano (ADA-USD) -6.6%, dogecoin (DOGE-USD) -10% and polkadot (DOT-USD) -6.2% changed hands in a sea of red as well.
The global crypto market cap, which was as high as $3T in November 2021, only stood at $790.3B at the time of writing, according to CoinMarketCap data.
Amid the fallout of FTX, cryptos have taken a much harder hit than equities, which also dipped intraday, with all three major U.S. stock indices trading in negative territory.
With increased downward pressure in cryptos, liquidity on centralized exchanges appeared to have also taken a nosedive. For example, "liquidity on Gemini remains very poor since the FTX/Alameda collapse," Kaiko Director of Research Clara Medalie wrote in a Twitter post. "Average spreads for its #BTC-USD pair increased from 2bps to more than 6."
"There was a sharp drop in liquidity on most cryptocurrency exchanges in the aftermath of FTX and Alameda's collapse," Medalie told Seeking Alpha. Alameda Research, Sam Bankman-Fried's trading firm that played a key role in the demise of his crypto empire, "was a big market maker for crypto assets, and a lot of other market makers got funds trapped on FTX, so there has been a visible impact on overall liquidity."
Meanwhile, she noted "there has been a slight improvement in liquidity over the past week as market makers slowly re-deploy capital across exchanges."
Recall crypto broker Gemini's lending business halted redemptions and new loan originations last week as the FTX downfall resulted in "abnormal withdrawal requests which have exceeded our current liquidity."
Elsewhere, the $10.5B Grayscale Bitcoin Trust (GBTC-USD), down 2.4%, has seen its discount relative to the underlying price of bitcoin (BTC-USD) widen to a record 45% on Friday, Bloomberg reported, indicating that market participants have seen a worse slump in GBTC than BTC itself. Indeed, GBTC shares dropped 77% in the past year, while BTC plunged 65%. Check out Seeking Alpha contributor Paulo Santos's assessment on why GBTC's discount to BTC has only increased.
Unsurprisingly, crypto-related stocks sold off during the session: Marathon Digital (MARA) -16%, Riot Blockchain (RIOT) -9.5%, MicroStrategy (MSTR) -8.9%, Coinbase Global (COIN) -9.7%, Bit Digital (BTBT) -13% and Bitfarms (BITF) -14.3%.
Previously, (Nov. 19) Coinbase said FTX downfall could extend crypto bear market through end-2023.