BTC Spread WidensSep 20, 2021
As is usually the case with sudden collapses in market structure, liquidity on the leading futures exchanges saw a meaningful deterioration over the last few days. While this seems to be a common occurrence in these situations, it’s worth noting that the liquidity deterioration today was not as severe as previous corrections — including the one earlier this month.
For further context, liquidity tends to deteriorate close to pivot points (tops and bottoms). A large deviation would happen near macro pivot points, and less aggressive deviations near local pivot points. When one side of the orderbook gets exhausted and has few orders, the bid-ask spread widens. Very simply, market makers stop wanting to sell BTC towards the bottom and start bidding it near the top.