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Market Structure is Shifting to Altcoins
May 10, 2021
  • Price Movements: Ethereum continues to surge to new all times highs in a week marked by notable institutional developments. 
  • Volume Dynamics: In just one year, the BTC-USDT trading pair on Binance went from accounting for more than 40% of total exchange volume to just 6%.
  • Order Book Liquidity: The quantity of asks on ETH-USD order books has been greater than the quantity of bids for the past two weeks, which suggests profit-taking. 
  • Volatility and Correlations: Bitcoin and the U.S. Dollar Index no longer trade in opposite directions. 
The newest version of our weekly Factsheet is the most comprehensive market reference in the industry, containing 40+ charts and analytics that update with the latest market data every week. The Factsheet (PDF) can be downloaded every week in this newsletter: 
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Price Movements
The Ethereum flippening? Ethereum has entered pure price discovery mode as it continues to surge, closing the week at just under $4k. Last week, ETH spot volume as a percentage of BTC volume flipped for the first time ever, with ETH-USD trades accounting for 51% of total volume, a first-of-its-kind occurrence. The same "flippening" happened in options markets. Meanwhile, Bitcoin inched up slightly throughout the week, although it remains stuck below the vaunted $60k price level. 

Overall, it was another exciting week in crypto with a new round of positive institutional developments including Citi's prospective crypto services, Goldman's new Bitcoin derivatives, Square's billions in crypto revenue, and Paypals exploratory stablecoin initiative. 
Volume Dynamics
Market structure on Binance shifts away from Bitcoin. Total trade volume on Binance has soared over the past year, with many billions in trades now executed every day. However, we were interested in understanding the breakdown in trade volume to get an idea of which pairs receive the largest share of volume. Specifically, we compare Binance's BTC-USDT trading pair to all other pairs that trade on the exchange (1,000+). The results are quite fascinating and show that over the past year, the BTC-USDT pair has gone from accounting for more than 40% of total volume to just 6%. 

What has happened over the past year that has resulted in such a sharp shift in market structure? The raw number of trading pairs listed on Binance has not changed that much--rather, overall market structure has shifted towards Ethereum, altcoin, and BNB markets. Traders are increasingly pouring money into alternative crypto assets beyond just Bitcoin in a sign that altcoin markets are growing and thriving on the largest crypto exchange in the industry. 

Latin American crypto markets are poised for hyper growth. Last week, Latin American exchange Bitso closed a $250m Series C funding round, valuing the exchange at more than $2.2 billion. The exchange has undergone unprecedented growth over the past year and is the leader in the rapidly expanding Latin American cryptocurrency industry. In just two years, trade volume on Bitso soared from under $100 million in monthly processed trades to more than $800 million in April 2021. Latin American financial markets and services have long been underdeveloped, but cryptocurrencies provide new possibilities for a growing range of users and use cases. 

Binance, Uniswap, and Coinbase account for majority of USDC volume. The USDC stablecoin is gaining traction with an increasing number of real-world use cases and a landmark partnership with Visa. However, competition among stablecoins in cryptocurrency markets is fierce, and USDC currently only accounts for a small percentage of total stablecoin volume. We wanted to get a better understanding of where this volume is concentrated so we charted total USDC volume across all exchanges in Kaiko's coverage. We can observe that Binance, Uniswap (both V1 and V2), and Coinbase account for nearly 80% of total USDC volume. Binance alone accounts for nearly half of all volume. Last week, we found that Tether volume is also concentrated on Binance, which suggests that the exchange is systemically important in the stablecoin space. 

In our April market report, we explore Coinbase's momentous IPO, Binance.US's growing ambitions, Tether's volatility, Ethereum's all time highs, and much more. 

You can download the report here or view the report on Coindesk's Research Hub

Download Market Report
Order Book Liquidity
Introducing a new liquidity measure. The ratio of bid depth to total market depth is a new measure we launched with the latest version of our Factsheet which can be used to obtain a market-wide view of liquidity on spot order books. When the ratio is greater than .5, this means that the quantity of bids is greater than the quantity of asks. Let's walk through how we derive this measure:

1. For all currency pairs, Kaiko takes two order book snapshots per minute containing all bids and asks within 10% of the mid price. From these order book snapshots, we can aggregate what we call 'Bid Depth' and 'Ask Depth'. 'Depth' refers to the total quantity of bids or asks placed within 10% of the mid price. For example, a bid depth of 500 for the ETH-USD pair on Coinbase would mean that there are 500 Ethereum on the bid side of this order book.

2. We then take hourly or daily averages for all measures we get for market depth. For example, an average hourly bid depth of 450 for the ETH-USD pair on Coinbase would mean that on average, there were 450 Ethereum on the bid-side of this order book. This measure fluctuates throughout the day as liquidity changes. 

3. Next, we can aggregate all measures for average bid and ask depth that we collect across different markets. For example, an aggregated bid depth of 900 for ETH-USD on Coinbase, Bitstamp and Gemini would mean that on average, there were 900 total Ethereum on the bid sides of all three order books. 

4. After deriving an aggregated, market-wide measure for market depth across a selection of exchanges, we can finally take a simple ratio by dividing bid depth by total depth. And voila! We have our ratio shown in the chart above, which is derived from order book data collected from eight of the largest fiat exchanges. 

Interpreting this measure: When the ratio is above .5, this means that the average quantity of bids on an order book are greater than the quantity of asks. We can observe that for the past week, the average quantity of asks on eight ETH-USD order books is greater than the quantity of bids. This suggests that traders are preparing to take profit at higher price levels. 

Order book data is massive and unwieldy to work with. At Kaiko, we have worked hard to do the backend work of collecting this data so that we can derive simple aggregated measures for traders and researchers to work with. You can view our updated bid/ask ratio every week in our Factsheet. 

Bitcoin market depth has plummeted. Where did all of the Bitcoin go? Following a record-setting bull run and consistently high buying pressure, the quantity of Bitcoin on BTC-USD order books has fallen sharply over the past year. We charted market depth since April 2020 and can observe that the quantity of Bitcoin has fallen from on average 20k Bitcoin on order books aggregated across eight exchanges to just 10k Bitcoin. Since January, market depth has been relatively stable but saw a sharp dip during the mid-April sell-off. A Bitcoin supply shortage could very well be the culprit as demand outstrips supply.
Volatility and Correlations
The U.S. Dollar vs. Bitcoin. Throughout 2020, Bitcoin and the U.S. Dollar for the most part moved in opposite directions from one another. The U.S. Dollar Index (DXY) tracks the dollar relative to a basket of foreign currencies. The pandemic-induced economic crisis and subsequent monetary stimulus caused the DXY to plummet as Bitcoin soared to new all time highs. However, the index has shown recent signs of life as economic recovery brings the possibility of scaled back stimulus measures (although disappointing jobs growth could put this on pause). If this trend is any type of indicator for Bitcoin’s price movements, then the DXY's 2021 gains could point to coming crypto losses. However, as the pandemic comes to a close in the United States we will likely see a shake up of financial trends as markets re-calibrate for a post-pandemic economy. Thus, only time will tell whether the DXY-BTC correlation will remain a relevant indicator. 

Stablecoins are becoming more stable over time. Stablecoins often struggle at the one thing they are designed to do: maintain their 1:1 USD peg. However, over the past few years stablecoins have become increasingly stable, evident when analyzing 30-day rolling volatility for five of the largest stablecoins. We can observe that until 2020, stablecoin volatility often fluctuated anywhere between 5-30%. Yet, since November of 2020 volatility has plummeted to below 5%. This is notable considering that overall price volatility in crypto markets has surged since the start of the current bull run. We can also observe that Circle's USD Coin (USDC) has consistently been the most stable stablecoin, with Tether (USDT) on average ranking second. 

Thanks for reading and see you next week!

-Clara Medalie, 
Some Updates From the Kaiko Team!

1. Consensus 2021: Kaiko's CEO Ambre Soubiran will be speaking at this year's Consensus! Register today for the can't-miss event of crypto. 

2. Blockworks Feature: Also, check out the latest feature in Blockworks on how Ambre went from being "the bitcoin blockchain person" at HSBC to CEO of the leading digital assets data provider. 

3. Sherlock Data Partner: Finally, Kaiko is proud to be a data partner for the newly launched Sherlock platform for blockchain and crypto data analytics! This is a huge milestone for the industry and we are thrilled to be along for the ride.

Kaiko is the premier cryptocurrency market data provider for professional traders, fund managers, researchers, exchanges, and custodians. Our data services enable seamless connectivity to historical and live data feeds from 100+ spot and derivatives exchanges

Browse our data dictionary to learn more about our extensive data offerings here. If you are interested in trialing our API, email us at 

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Kaiko's research newsletter was written by Clara Medalie, with help from Anastasia Melachrinos and the Kaiko team. This is not financial advice. Any redistribution of charts appearing in this Factsheet must cite Kaiko as the sole provider and creator.
Copyright © 2021, All rights reserved.

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