Coinbase Says Bitcoin Liquidity on Exchange Unfazed After SEC’s Lawsuit Against Cumberland

As a seasoned crypto investor with a keen eye for market trends and liquidity fluctuations, I find myself intrigued by the recent reports surrounding Coinbase and Cumberland. Having navigated through numerous market cycles and witnessed firsthand the ebb and flow of liquidity on various exchanges, my gut feeling tells me there’s more to this story than meets the eye.

Despite reports of reduced Bitcoin (BTC) order book liquidity due to the SEC’s legal action against Cumberland, Coinbase (COIN) maintains that its trading environment remains unchanged.

As a researcher, I’d like to clarify that I haven’t observed any significant increase or decrease in the liquidity depth of BTC-USD at the 2% level across October, as per my observations. This is based on my personal findings and not necessarily reflective of the broader market. This statement comes in response to a recent report by Kaiko, which suggested a decline in liquidity, specifically measured by the 2% market depth, on October 10th. The decline was allegedly due to reduced liquidity following the SEC’s charge against Cumberland for operating as an unregistered dealer in cryptocurrency assets valued over $2 billion since March 2018.

On October 10th, at 18:00 UTC, according to a report released on Monday, the Bitcoin depth (a measure of liquidity) on Coinbase began decreasing, falling by approximately 46% from 534 BTC to 267 BTC within a short period. This decrease meant that an order 46% smaller than what was needed before 18:00 UTC could potentially shift the Bitcoin spot price by 2% in either direction.

2% market depth refers to a grouping of buy and sell orders that are within 2% of the mid-price or the average of bid (offered) and ask (desired) prices. This measurement serves as an indicator of liquidity, or the market’s capacity to handle significant trades while maintaining consistent prices and minimizing price discrepancies for the trader – often referred to as slippage.

Kaiko observed that as the depth of asks (sell orders) lessened, the depth of bids (buy orders) grew, suggesting that market makers might have repositioned themselves in preparation for a potential decrease in prices.

As a crypto investor, I’ve noticed that other trading platforms have experienced a decrease in liquidity as well. According to Kaiko, the total liquidity on U.S. exchanges remains lower than it was before the lawsuit, suggesting ongoing effects from the legal proceedings.

In a mail to CoinDesk, Cumberland expressed reservations with the analysis, drawing attention to their recent public statement, which suggested no changes in its activities due to the SEC’s lawsuit.

As a crypto investor, I want to assure you that despite the recent action taken by the SEC, our day-to-day business activities remain unchanged. Furthermore, the assets we utilize to offer liquidity continue to function without any modifications.

In a recent communication with CoinDesk, Kaiko explained that the liquidity, which had initially decreased on the ask side, seems to have bounced back now. They suggested that this initial drop could be attributed to adjustments in market predictions or anticipations.