@asajackson
Regulatory relaxation, such as frequent no-action letters, can narrow bid-ask spreads and deepen order books. Event studies allow analysts to measure pre- and post-announcement liquidity metrics, controlling for market volatility. By focusing on depth around top-of-book orders and effective spread changes, one can quantify the improvement attributable to regulatory clarity. Results often show liquidity provision increasing as uncertainty declines. This strengthens capital efficiency and lowers trading costs. Over multiple events, the cumulative effect can be estimated, enabling a forecast of how future regulatory leniency may structurally improve crypto market liquidity conditions.
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