(Bloomberg) -- As Sam Bankman-Fried goes on trial for the crypto world’s biggest alleged fraud, liquidity in the digital asset market is still only half of what it was before his FTX trading platform collapsed almost a year ago.

The sudden drop in liquidity was dubbed the “Alameda Gap” in November by blockchain-data firm Kaiko. Alameda Research was the trading arm of Bankman-Fried’s failed digital empire. The lingering effect is largely a result of the huge losses that market makers incurred after the meltdown, researchers at Kaiko wrote in an report Tuesday. 

Many traders and market makers either kept significant funds on the exchange, had devastated crypto projects in their portfolio, or accepted FTT, the exchange’s cryptocurrency, as collateral. The FTT token acted as a trigger for FTX’s collapse, unraveling the multibillion dollar hole in the company’s balance sheet, according to the report.

  • Subscribe: The Bloomberg Crypto newsletter will bring you the latest on the SBF trial

Market makers fulfill an especially valuable role in the liquidity-sensitive crypto space by buying and selling coins. But as they turn more conservative in times of crisis, that results in thinner liquidity where users have greater difficulty buying or selling an asset, which in turn makes the market more volatile.

“Over the past 11 months, crypto trade volume and market depth has hit multiyear lows along with price volatility,” Kaiko noted in the report.

Kaiko measures the market’s liquidity by calculating the quantity of bids and asks within 2% of the mid-price for one token’s trading pairs on exchanges.   

Even with liquidity down, token prices have rebounded from the lows seen during the meltdown. Bitcoin has jumped 67% this year, a partial rebound from last year’s rout. The token remains far off its pandemic-era record of almost $69,000. 

At FTX’s peak, the company was processing almost $100 billion in trading volume every month, despite never capturing more than 7% of overall market share in spot trading. The exchange emerged as a market leader due to its low fees and high liquidity, as well as expansive offering of crypto assets. The majority of FTX’s trading occurred on its derivatives platform.

The case against Sam Bankman-Fried began with jury selection in federal court in lower Manhattan on Tuesday. 

The SEC alleges that Bankman-Fried hid the extent of the ties between the two entities from investors, and personally directed that FTX’s “risk engine” shouldn’t be applied to Alameda. This in effect amounted to what the SEC called an unlimited line of credit funded by FTX customers. Bankman-Fried is charged with seven counts of fraud and money laundering, and could face more than 100 years in prison if found guilty on all counts. Bankman-Friend has pleaded not guilty to all the charges against him.

©2023 Bloomberg L.P.