Ether's Strong Rally Contrasts with Sharp Drop in Market Liquidity
Ethereum's native token, ether (ETH), delivered a standout performance in the third quarter, surging 70% and outpacing bitcoin's 42% gain. However, beneath this impressive rally, the market for ether became significantly harder to trade. CoinGecko reported that ether's median daily market depth relative to bitcoin dropped sharply to 35% to 45%, down from at least 60% a year earlier. This stark decline in liquidity challenges the assumption that rising prices naturally attract more participants and deepen order books.
Market depth, a key measure of liquidity, represents the total dollar value of resting orders within a set distance of the current price. For ether, the depth within 0.15% of its market price stood at roughly $13 million to $14 million. While this indicates fair liquidity, the relative decline compared to bitcoin raises concerns about the market's ability to absorb large orders without causing significant price slippage. Solana (SOL), another major token, also saw a reduction in depth within 2% of its price, falling from about $28 million to $20 million per side. In contrast, XRP maintained steady liquidity with around $30 million in total depth, though its order books leaned bullish.
The liquidity findings come amid bearish technical signals across major cryptocurrencies. Analyst Ali Charts highlighted TD Sequential sell signals on four-hour charts for bitcoin, ether, and Solana, noting that past signals preceded corrections. Additionally, a recurring pattern of Sunday pumps followed by Monday dumps suggests a possible pullback. The convergence of these technical indicators and thinning liquidity adds a layer of risk, potentially amplifying the speed and severity of any short-term move lower.