The previous month would be the team's best if there were a bitcoin marketing team. Consumers are looking for alternatives to protect their money since bank confidence has drastically declined in the United States and Europe. Here comes bitcoin (BTC), a cryptocurrency created expressly for this use. It is a truly decentralized form of money that is not subject to institutional control. Conor Ryder works as a research analyst at the cryptocurrency data startup Kaiko. 

At first appearance, the recent banking crisis appears to be an ideal stimulus for a Bitcoin price surge. Still, delving a little further into the reasons behind the shift leads us to liquidity, and more precisely, a lack of it.

While the story makes sense and has resulted in a large number of individuals seeking bitcoin at the same time,

illiquidity has most likely been a powerful price driver. I'd want to take this opportunity to congratulate the BTC maxis. They haven't had anything to shout about lately. Yet this is the moment for which bitcoin was designed, and it is the first time since its creation that the banking system has had a confidence crisis.

Also see: Bank Concentration Threatens Freedom, Strengthens Case for Bitcoin.

For the first time since 2008, consumers have begun to recognize that the US dollars (USD) they hold are more vulnerable than expected, 

making Bitcoin (BTC) appear fairly appealing as a percentage of a broader portfolio. Yet, while narratives intended to explain or anticipate price fluctuations are strong, 

the present market structure cannot be overlooked. Volatility is strong in both directions when liquidity is low in any financial market. Prices have less support on the downside as well as the upside. In this case, the story of bitcoin as a financial hedge provided the necessary impetus for BTC. But, there was no positive barrier to overcome: BTC market depth, or the number of orders waiting to be completed on an order book,

Last week, the FTX exchange and its sister company, Alameda Research, plummeted to 10-month lows,  

falling below levels witnessed previous to the demise of the FTX exchange and Alameda Research. When the "Alameda Gap" materialized following the decline in value of the virtual currency bitcoin. This discrepancy indicates that there was insufficient money available to buy or sell bitcoin. This occurred as a result of the disappearance of one of the primary locations for buying or selling bitcoin. People's desires to buy and sell bitcoin vary, and this variance hasn't been solved. It is expanding as a result of issues with some websites that facilitate the purchase or sale of bitcoin.

Bitcoin benefited from the US banking crisis, but its illiquidity prevents it from being a USD hedge.



which cut market makers off from critical USD payment rails. When market makers encounter an unforeseen operational difficulty,

their first reaction is to withdraw liquidity from order books until they obtain clarification. Another word of caution: fees for Binance's BTC-USDT and BTC-BUSD trading pairings have been reinstated. We've seen a significant decline in liquidity on some pairs in recent days as fees have been reinstated. Because of the cost, market makers on such pairs can no longer justify their broad spreads (the price difference between the bid and ask),   

forcing them to provide smaller spreads, and reducing their profitability. As a result, liquidity on Binance's BTC-USDT exchange, the most liquid pair in crypto, fell by 70% overnight. BTC-TUSD is now the sole zero-fee pair. If liquidity does not flow into that pair, order books may become much more empty in the coming weeks.

Bitcoin benefited from the US banking crisis



All of this means that it takes less and less "size" to alter the price of BTC, potentially increasing volatility as more traders get access to pricing. Fortunately for investors, the bank's confidence issue triggered a burst of buyer demand, 

pushing the price higher so far. Also see: US Banking Ban Creates Opportunity for Crypto in Europe | Conor Ryder

Yet, the lack of support to the upside also applies to the downside, suggesting that a significant move below in the coming weeks should be avoided. All of this suggests that a bitcoin victory lap is overdue.

 The recent surge in cryptocurrency may have been driven by illiquidity, regardless of whether it makes sense for capital to rotate toward Bitcoin given recent events in traditional markets.