Binance Bitcoin Liquidity Takes a Dive Amid ETF Speculation Frenzy

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Rumors can create ripples in even the most extensive ponds. On Monday, Binance, widely recognized as the globe’s top cryptocurrency exchange in trade volumes, experienced this first-hand. A sudden whirlwind of speculation, ignited by an unfounded social media rumor, led to a severe dip in the platform’s liquidity, leaving Binance traders in a more challenging spot than those on Kraken and Coinbase.

Effects From a False Report

The cryptocurrency market witnessed a frenzy when word spread like wildfire about BlackRock’s supposed spot exchange-traded fund (ETF) green light. This unfounded report swiftly fueled a surge, catapulting Bitcoin’s price by 7.5% to $30,000. However, the celebration was short-lived, as BlackRock soon refuted the claim, causing the crypto giant to relinquish its fleeting gains.

During this chaos, Binance’s 0.1% ask depth, a key indicator of buy-side liquidity, plummeted from 100 BTC to a mere 1.2 BTC, valued at $30,000. This significant drop wasn’t exclusive to Binance. Other major platforms like OKX and Bybit felt the squeeze, with their 0.1% depths bottoming to around 2 BTC. On average, significant exchanges saw their ask depth dive below 95 BTC.

Slippage Shakes Traders

The sudden evaporation of liquidity didn’t bode well for many in the crypto community. Traders, including noted names like exitpump and Omz, witnessed their investments erode due to slippage, some as drastically as 20%. Interestingly, Kraken and Coinbase showcased resilience during this liquidity storm, outshining Binance and other competitors.

This liquidity crisis isn’t the only challenge Binance is currently grappling with. Recently, in the aftermath of the October 7th Hamas attacks, Israeli authorities demanded a freeze on more than 100 accounts on Binance. This move aims to choke off the funding avenues of the Palestinian militant faction. As the authorities expand their probe, they seek details on an additional 200 crypto accounts, predominantly on Binance.

Last week, Binance acknowledged collaborating with Israeli officials to thwart terror financing. However, when pressed by the Financial Times about the exact number of accounts suspended, the firm remained tight-lipped, confirming only a “small number.”