Introduction: Following the approval of spot exchange-traded funds (ETFs) in the United States, bid-ask spreads on major exchanges like Coinbase and Kraken have witnessed a significant narrowing. Analysts at Kaiko attribute this trend to improved market liquidity and depth, signaling positive developments in the cryptocurrency landscape.
Trend Analysis: Post-approval of spot ETFs, bid-ask spreads for Bitcoin (BTC) have notably decreased, indicating enhanced market liquidity and trading activity depth. Kaiko’s research report highlights Kraken as experiencing the highest volatility in spreads during January, with peaks observed across various exchanges before plummeting in recent weeks.
Impact Beyond Bitcoin: The trend isn’t limited to Bitcoin or U.S. markets alone, as the average bid-ask spread for the most liquid BTC and Ethereum (ETH) trading pairs has also declined across multiple exchanges. Coinbase and Kraken notably saw the strongest decline, while Binance and OKX experienced a less pronounced drop, attributing to their already low spreads.
Competition Dynamics: The approval of spot ETFs is expected to ignite a new wave of competition among exchanges, with Coinbase already announcing fee waivers for large traders. This move is anticipated to further drive down spreads and enhance market efficiency.
SEC’s Perspective: Despite the approval of spot ETFs by the U.S. Securities and Exchange Commission (SEC), Gary Gensler, the SEC’s chair, reiterated a cautious stance on cryptocurrencies. He clarified that while spot ETFs were approved, it did not imply an endorsement of Bitcoin or cryptocurrencies by the regulatory body.
Conclusion: The narrowing of bid-ask spreads on U.S. exchanges post-spot ETF approvals signifies a positive shift in market dynamics, with improved liquidity and depth. As exchanges vie for market share and regulatory clarity evolves, stakeholders anticipate further enhancements in market efficiency and accessibility in the cryptocurrency space.
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