Capital outflows appear to become one of the main issues hitting crypto markets.
Bitfinex, a prominent cryptocurrency exchange known for its deep analytics, has just released a new report that serves as a wake-up call for the crypto industry.
The report indicates a significant capital outflow from the crypto market, amounting to $55 billion, during August.
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The research from Bitfinex utilizes an aggregate realized value metric, which includes the realized capital of Bitcoin (BTC) and Ether (ETH), as well as the combined supply of the top five stablecoins — Tether (USDT), USD Coin (USDC), Binance USD (BUSD), Dai (DAI), and TrueUSD (TUSD). According to the report:
By early August, the industry had started experiencing capital outflows.
The financial drain wasn’t confined to Bitcoin; it also had ripple effects on Ether and stablecoin liquidity. Bitfinex pointed out that:
August was the largest red monthly candle for BTC since the bear market bottom was formed in November 2022 at -11.29 percent as per Bitfinex Data.
Bitfinex’s analysis further highlighted the growing role of isolated, event-based volatility in shaping crypto prices.
Specifically, two events in August caused substantial fluctuations in Bitcoin prices. A flash crash on August 17th triggered an 11.4% sell-off in Bitcoin, and on August 29th, Grayscale’s partial legal victory against the Securities and Exchange Commission triggered a 7.6% surge in Bitcoin prices within just two hours.
We believe that while volatility metrics continue to be low, the liquidity crunch in the market has allowed isolated events to have a bigger impact on market movements.
Also highlighted was a noticeable uptick in Bitcoin open interest, spurred by increased institutional focus and wash trading activities on certain platforms. In contrast, Ether’s futures and options trading dwindled to $14.3 billion per day, a dramatic 50% fall from its two-year average.
The trajectory seen in the derivatives market, particularly in open interest across both futures and options, mirrors these patterns of low liquidity.
It is worth noting that Bitfinex’s report confirms CoinShares reports, which reveal that the industry is experiencing four consecutive weeks of outflows, with Bitcoin recording almost $69 million in outflows during a week from September 3rd to 9th.
Bitfinex’s latest report underscores the urgent need for the crypto community to address the substantial capital outflows and liquidity issues that plagued the market in August. With $55 billion exiting the ecosystem and affecting a range of assets from Bitcoin to stablecoins, the data reveals that the crypto market is at a crossroads, confronted by heightened volatility and evolving dynamics.