Market makers cautious amid the GBP plungeThe GBP volatility last week was highly unusual, creating opportunities and price discrepancies. Volumes soared coinciding with the GBPUSD bottom early Monday last week. Adjusting the BTCGBP pair to USD shows that the BTCGBP traded at a significant discount to dollar spot amid the height of the pound frenzy.
The charts illustrate the dollar-adjusted premium or discount in Bitfinex’s BTCGBP pair last week. As the GBP bottomed vs. the USD, BTCGBP traded at a massive discount compared to BTCUSD. The discount turned into a prolonged premium with certain wicks deep into discount terrains as GBP traded in a highly volatile environment. The prolonged structural mispricing may have been caused by market participants seeking to reduce GBP exposure in the uncertain environment. It’s likely that the predominant force was market makers reducing their exposure. Substantial wicks towards the downside during the highly volatile days imply inefficiencies, lagging, and arbitrage opportunities that active market makers would have taken during regular market conditions.
Source: Tradingview (Binance, Coinbase, Kraken, Bitfinex, Bitstamp, Gemini)