The crypto market has experienced a liquidity dry up in the wake of the collapse of crypto exchange FTX and its sister trading firm Alameda Research, according to data provider Kaiko. 

The firms, both founded by disgraced former billionaire Sam Bankman-Fried, were key market participants until they filed for bankruptcy protection earlier this month. 

This has created what Kaiko is describing as the "Alameda gap."

"Crypto liquidity is dominated by just a handful of trading firms, including Wintermute, Amber Group, B2C2, Genesis, Cumberland and [the now defunct] Alameda," the firm said. "With the loss of one of the largest market makers, we can expect a significant drop in liquidity, which we will call the 'Alameda gap.'"

Kaiko said that bitcoin's market depth — which refers to the market's ability to absorb large orders over a specific period of time — has seen a "huge" decline, with Kraken's order book seeing a 57% reduction in depth while Binance and Coinbase saw drops of a 25% and 18%, respectively. 

The ability to make a large order within 2% of bitcoin's midpoint price has declined to the lowest level since early June. Wintermute's Evgeny Gaevoy said that market makers re-examining their exposure to certain venues in the wake of the FTX meltdown is one driving factor behind the liquidity dry-up.

"This liquidity crunch can be explained by two factors," Wintermute's Gaevoy said. "On one hand, MMs having less access to BTC borrow since most of lenders are overly cautious or outright dead. Parallel to that MMs are aggressively reducing their exposure to most centralized exchanges as the full extent of contagion is unclear."