Trading crypto lately, with the exception of the largest digital assets, is a bit like springboarding into shallow pools, Crystal writes.

• That would make Kaiko, which can provide a clear picture of what's going on underneath the surface — including market depth — critically important to the larger crypto ecosystem, according to Ambre Soubiran, CEO of the crypto data firm.

The big picture: Token prices have rebounded post FTX, but market depth — a measure of liquidity looking at an asset's ability to absorb a large trade without moving its price a lot — is a shadow of what it used to be.

• It's a ripe environment for crypto investors to get wrecked, Soubiran tells Axios in New York City.

Zoom in: Without a full picture of market depth, a trader might struggle to sell 1 million of a given token — something they may want to know before they buy that many.

• Soubiran says a "healthy" order book might show thousands of orders representing millions of dollars of demand.

Be smart: Kaiko has data on some 200,000 markets — each defined as a token-trading pair (such as BTC/USD or BTC/ETH) on name-your-venue, both centralized and decentralized.

• BTC might have a deep market, but there are plenty of others that don't. (See more on that below.)
• It also provides data on say, small gaming tokens that trade on Uniswap—information that is not about accuracy, but merely availability.

Flashback: A lack of demand for FTT ultimately led to FTX's unwinding, Soubiran says. (Recall CoinDesk's initial reporting showed an unusually large amount of FTX's native cryptocurrency on Alameda Research's balance sheet.)

• "There was no actual market to absorb that much FTT."
• 💭 Our thought bubble: A very large gentleman diving into a Solo cup, say.

Liquidity also might matter to someone extending a loan on token collateral. Soubiran offers a hypothetical, drawing from her background in equities.

• "If you're going to borrow $100 million from me posting as collateral X coins, I'm going to ask you how many days of trading that position represents."

Between the lines: That is how long will it take to sell those coins, without tanking the price.

Zoom out: The market is changing in other ways: "Historically, volume of trading was driven by U.S. market hours. Now we're seeing a shift to APAC trading hours."

• The regulatory environment might have catalyzed the sea change, Soubiran says, drawing from her perspective at the helm of Kaiko, which has offices in Hong Kong, Singapore, Paris and New York.
• "Hong Kong has been trying to provide more licenses —it's surprising. I don't know whether this is a reaction to the U.S., trying to bring capital back."
• Europe has been somewhat "crypto-friendly to neutral."

What we're watching: The firm wants to be the source of data for all assets, digital or not: "Kaiko's ambition is to provide data for any given asset. That's why we're doing what we do."

The bottom line: In markets, the "first wave of innovation" was electronic trading, the next, Soubiran says, will be blockchain.

Market capitalization is not always a reliable picture of a token's health, Crystal writes.

• It's just recent price multiplied by coins outstanding.

Zoom in: Thinly traded tokens with high market caps can be deceptive to traders who assume that a high price is equal to high liquidity, according to Kaiko's Soubiran.

• Yes, but: It does not.

Details: Kaiko's quarterly token liquidity rank shows it, using average 1% depth, metrics, and daily volume and spreads.

• Binance's native currency BNB ranks third on market cap, but drops to 11th on liquidity, according to data compiled by Kaiko.
• DOGE ranks higher relative to BNB on its liquidity, owing to its meme-d popularity.

How it works: Soubiran's hypothetical: She issues 1 million AMBRE coin and sells them to CK for $200 per coin — a single trade, and "BOOM, $200 million market cap."

The other side: There are plenty of other tokens that appear to be more liquid, but don't break the Top 10 in market cap because of their price.

The House Financial Services Committee has published a draft of legislation meant to cover stablecoin issuers, Brady writes.

Why it matters: Stablecoin legislation has been anticipated for months, with legislators seeing it as the first order of business. Stablecoins are the form of cryptocurrency that comes closest to fiat currencies, such as dollars and euros.

Driving the news: The legislation has not yet been introduced and doesn't have sponsors. It's published as a document on the committee's webpage for Wednesday's subcommittee hearing.

• That session will feature the New York Department of Financial Services, Columbia University, the Blockchain Association and Circle.

Details: The law would make it illegal to issue a stablecoin without prior approval from the government.

• In 2018, all kinds of companies were issuing stablecoins (Circle, MakerDAO, Paxos, Gemini, and lots of tiny startups who thought they had a great angle).
• Issuing a stablecoin without permission could result in a $1 million fine and five years in prison.
• Of note: The draft legislation provides paths for both depository institutions and non-banks to issue stablecoins.

Meanwhile, Stablecoin issuers would be covered by banking laws, such as the Bank Secrecy Act, but stablecoins would not receive the same protections as bank deposits, such as FDIC insurance.

Zoom out: The legislation would also require a study on and hearings about a central bank digital currency or digital dollar issued by the U.S. government.

The intrigue: The legislation forbids stablecoins designed like terra usd (UST) — the stablecoin that blew up in May 2022 — for at least two years while a study by the Treasury Department is conducted and Congress considers its findings.

• It calls them "endogenously collateralized stablecoins," that is, "that relies solely on the value of another digital asset created or maintained by the same originator."
• Entrepreneurs have been experimenting with crypto stablecoins of many weird designs going all the way back to BitUSD in 2014.

Elsewhere: Stablecoins are one sector of the crypto industry that has been gathering new users, even as the rest of the market is down, particularly in Latin America.

What we're watching: The day before the subcommittee hearing on stablecoins, SEC chair Gary Gensler will speak before the full committee.

🚨Crypto exchange Bittrex was ready to wind down U.S. operations when the SEC's enforcement staff came knocking in March (Wall Street Journal); now the regulator is suing. (CoinDesk)

📁 Crypto firm BlockTower winds down its market-neutral fund. (Bloomberg)

🏀 Shaquille O'Neal has been served papers in a lawsuit over his role in promoting FTX. (Decrypt)

💎 More than a million ETH have been withdrawn since last week's upgrade. (The Block)

This T-shirt wearer might have to register with the SEC, Crystal writes.

What's happening: Commissioner Hester Peirce, a crypto advocate, wore this T-shirt during Friday's open meeting, during which they discussed the SEC's proposed change to the definition of "exchange" — used in part to determine the scope of its authority.

The intrigue: It's not just a shirt.

• The shirt republishes code submitted by Coin Center, which in April pointed out in a comment letter that the SEC's proposed definition shifts its basis from conduct-based approach to a speech-based one.
• And based on the latest from the SEC, the wearer of the T-shirt might fall under its proposed definition of exchange.

Context: Per the SEC's Friday release: The term exchange “means any organization, association, or group of persons, whether incorporated or unincorporated, which constitutes, maintains, or provides a market place or facilities for bringing together buyers and sellers of securities."

• The existing definition provides for bringing together "orders."

Between the lines: DeFi would qualify.

Yes, but: How?

Zoom out: Peirce argues that because that "makes everybody involved in the relevant blockchain ecosystem part of a 'group,' it creates significant ambiguity around what speech requires government pre-approval."

• For example: "Does a university professor who, as part of her research publishes such code, risk triggering the exchange definition merely because she is paid for that research?"