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Monthly Market Review - March 2023

This month we will look at how the market structure has changed throughout the first quarter of 2023 and what it means for the market moving forward.



Price (1 March 2023)



Price (31 March 2023)



% Return



Digital assets did very well in the first quarter of the year, with Bitcoin up 72% and the overall market cap now exceeding $1 trillion. This rally aligns with a broader risk-on sentiment in the market, with the NASDAQ gaining 17% in the same period. It remains promising for the space that digital assets have proven resilient and have led the broader recovery. As discussed last year, we were concerned that crypto could lag any recovery because of some of the sector-specific issues it has experienced. Additionally, and perhaps more importantly, the market has also started to become uncorrelated with the broader market; the correlation of BTC to the S&P500 is now falling as the markets are no longer tightly coupled, even though they are broadly trending in the same direction. Independence from traditional markets increases the attractiveness of digital assets as they become a source of diversification.

Typically, as the broader market trends up, the liquidity should improve; however, strangely, Bitcoin’s market has grown more illiquid in the last month. One way this is measured is market depth, with 2% market depth being the amount of an asset available for sale within 2% of the mid-price; this figure has been trending downwards, making it harder for large market participants to fill their orders.

The sudden decline in market depth in March (highlighted in red) can be attributed to the banking crisis, especially the closure of Signature and Silvergate; these banks both had USD settlement rails that allowed participants to send money between each other instantly and seamlessly compared to the multi-day bank transfer process in the US. Traders used these rails to move funds between exchanges quickly, resulting in a greater market depth.

Usually, market depth and trade volume are closely linked, so one would expect trade volume to have also trended downwards; however, in this instance, the trade volume is now at a multi-month high while the market depth has fallen. This has, in turn, increased the volatility, with Bitcoin’s volatility steadily climbing throughout the year.

In recent months, a decrease in market depth has made the digital assets market less orderly (and more fragmented), so good execution technology has become valuable. Luckily, we have been continuously developing this technology since we started in 2020.

We perform best in a highly liquid and volatile market, so the market structure continues to move in our favour, which bodes well for the next quarter.


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