The crypto market experienced a significant downturn in 2022/2023, with trading volumes reaching their lowest levels in recent years. Despite this, trading continued unabated.
A report by market maker and liquidity provider Wintermute highlighted a 400% increase in over-the-counter (OTC) market volume over the year, indicating a shift away from traditional crypto exchanges.
In the second half of 2023, individual transaction numbers surged sixfold to 29 million, with weekly OTC volume hitting $2 billion. Wintermute’s CEO, Evgeny Gaevoy, observed a market slowdown and liquidity drying up, leading to a shift from exchanges to OTC trading.
The lack of liquidity, a persistent issue for crypto exchanges throughout 2023, prompted many large institutional investors to move to OTC desks to avoid significant market price impacts during large trades.
Despite Bitcoin‘s substantial rise over the year, the market struggled with liquidity challenges due to the ‘Alameda Research Gap’ following the collapse of the prominent trading firm and liquidity provider. Binance, the world’s largest crypto exchange by volume, also faced issues, with a 25% drop in order book liquidity after a $4 billion settlement with U.S. authorities and the resignation of CEO Changpeng Zhao.