The Bitcoin market on the Coinbase exchange has recorded a downward trend in market depth at 2%, following the opening news of this week.
While the SEC filed its lawsuit against the market maker Cumberland, liquidity in the crypto exchange sharply decreased, alerting investors to possible manipulations.
Despite this, Coinbase claims that the situation is under control and that there is enough depth to host rich trading sessions.
Let’s see all the details below.
Bitcoin liquidity on the exchange Coinbase declining after the SEC lawsuit against Cumberland
As reported by a recent report from Kaiko, the cryptocurrency exchange Coinbase has experienced a decline in market depth in Bitcoin trading.
As suggested by the blockchain researcher, after the SEC filed a lawsuit against the market maker Cumberland, U.S exchanges like Coinbase started to lose capital.
This is probably due to the fact that Cumberland had to remove liquidity from the US markets to be able to face its legal battle.
We remember that the company represents one of the main sources of fuel for the crypto markets, offering billions of dollars for user exchanges
Coincidentally, during the day of October 10, declining data was observed for Bitcoin depth on exchanges like Okx, Kraken, and Coinbase.
Very interesting to observe how in the BTC-USD pair on Coinbase, the market depth at 2% dropped in a few hours from 492 to 267 BTC.
This implies a 46% drop in the liquidity of exchanges on Bitcoin, such as to favor price manipulation dynamics.
This metric indeed helps measure the market’s ability to process large trading orders with minimal impact on prices.
In that instance, 267 BTC, or just over 24.5 million dollars, would have been enough to move the crypto asset by 2% in both directions.
A few hours later, la profondità di Coinbase è tornata a 400 BTC, with the ask orders (selling) that have decreased in favor of the bid (buying) ones.
Kaiko suggests that this dynamic is due to the adjustment of Cumberland’s positions. In any case, liquidity remains lower than the data prior to the accusations by the SEC.
The exchange minimizes the impact of the liquidity drop
The exchange Coinbase promptly responded to Kaiko’s report stating that the Bitcoin market depth is not at risk of manipulation.
As stated by a spokesperson for the exchange listed on Nasdaq, the conditions remain stable even following the SEC vs Cumberland case.
Here is how it was highlighted verbatim in a recent interview with Coindesk:
“We have not seen a substantial change or a drop in BTC-USD depth at 2% for the entire month of October.”
We do not know if the liquidity adjustment after the drop on October 10 was a maneuver by the market maker or by Coinbase itself.
In any case, it seems that the trading pair BTC-USD on the exchange has returned to levels of depth adequate to ensure a healthy trading session.
In all this, Cumberland also intervened regarding the matter, confirming its non-involvement:
“We are not making changes to our commercial operations or to the activities in which we provide liquidity as a result of this action by the SEC”.
It is therefore possible that what temporarily compromised the depth of the exchange were the platform’s clients who, frightened by the news, removed limit orders. Subsequently, noticing that the impact on prices was minimal, they repositioned the orders, bringing liquidity back to acceptable levels.
In any case, Coinbase remains the largest exchange in the world with more Bitcoin on its balance sheet, boasting a share of 824,452 BTC according to Coinglass data, highlighting its dominant status.
Although sometimes the short-term depth can drop drastically, overall the broker remains the largest and safest in the world for trading in Bitcoin.
In the meantime, overall the situation of BTC reserves on exchanges continues to become more complicated, with values reaching a new all-time low.
This means that there are fewer and fewer Bitcoins around that can be exchanged, highlighting the effects of a deflationary monetary dynamic.
Graphical analysis of the stock of Coinbase COIN
While the exchange Coinbase faces issues related to the liquidity of Bitcoin exchanges, its own stock COIN marks a rise of 26.9% in the last 5 days.
The stock listed on Nasdaq is now worth 210 dollars per share, with a capitalization of 52.3 billion dollars. If the stock were listed on the crypto markets, it would be the 6th currency by market cap, just behind Solana.
Compared to a year ago, the prices are up by 186%, due to a strong phase of hype in the first 3 months of 2024.
At the end of March, in fact, COIN reached its local high at 261 dollars, before retracing over the following months to the bottom of 150 dollars.
Now the bull seem to have returned to characterize the price action of the Coinbase exchange stock, bringing prices back above the psychological level of 200 dollars.
It is likely that in the coming months, if Bitcoin manages to reach new all-time highs, this stock will also see a similar trend with targets above the annual ATHs.
Eyes also on the financial results of Coinbase, which will be published on October 30.
If the company reports earnings greater than analysts’ expectations, we could likely see a jump in COIN’s prices.
The date of the “earnings report” is also close to another crucial date for the fate of the crypto market, namely the United States elections.
A victory for Trump and the Republicans could be seen as a good omen by investors, who would see fewer potential regulatory risks in investing in the exchanges.
Just like for Bitcoin, the market outlook for Coinbase is also super positive. Get ready for the bull market!
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