New crypto projects have been advised to postpone their launches by up to six months after the collapse of Sam Bankman-Fried’s (SBF) Alameda Research sapped liquidity across major tokens by up to 50%.
As reported by CoinDesk, CoinMarketCap data shows that new coin applications dropped massively in the latter part of 2022 and have numbered just 3,000 year-to-date. This is in sharp contrast to the more than 10,000 in the first quarter of last year.
Applications tailed off toward the back end of 2022 as SBF’s major market maker imploded, taking billions of dollars in liquidity with it.
Guilhem Chaumont, CEO of Paris-based market maker and brokerage Flowdesk, told CoinDesk in an email:
“Post-FTX we have seen liquidity dry as up to 50% on major coins.
“On smaller market caps, the liquidity reduction has been even worse because Alameda has closed all their support for token issuers and other big market makers have reduced their exposure and activity.”
As a result, he says that new projects should hang fire on their launches for “three to six months.” He also predicts that the current bear market could last until mid-2024.
Liquidity drain is known as the “Alameda Gap”
Bitcoin and ether market liquidity is measured by the 2% market depth. When this liquidity dips, it makes it difficult for traders to execute large orders without affecting price and causes problems for projects looking to issue new tokens.
According to crypto data provider Kaiko:
“Crypto liquidity is dominated by just a handful of trading firms, including Wintermute, Amber Group, B2C2, Genesis, Cumberland, and (the now defunct) Alameda.
“With the loss of one of the largest market makers, we can expect a significant drop in liquidity, which we will call the “Alameda Gap,” (via CoinDesk).