Bitcoin price volatility ahead in April as trading volumes dry up
Last month, Bitcoin and the broader crypto market showed strong resistance to the banking crisis and continued their upward journey. Bitcoin ended the 1st quarter of 2023 with almost 70% gains.
However, Bitcoin is likely to show more price volatility in April as liquidity dries up significantly. Blockchain research firm Kaiko stated that investors are likely to pay more on trades due to slippages or due to the difference between the expected price and the trade execution price. This difficulty in trading looks like clear signs of deteriorating liquidity and the chances of volatile price swings ahead this month.
Bitcoin has undoubtedly been the best-performing asset so far this year in 2023. But the overhangs of increasing US regulatory action and the closure of a few crypto-friendly banks continue to put pressure on the market. Conor Ryder of Kaiko told Bloomberg:
“It’s more indicative of the institutional reluctance to offer liquidity in the space. Many crypto firms don’t want to be caught in the middle of a battle between US regulators and exchanges.”
Although the BTC price recovered strongly in early 2023, trading volumes and liquidity have dried up significantly. Amid several fraud attempts last year, retail investors are still on the edge of greater participation in the market. Mark Connors, head of research at digital asset management firm 3iQ told Bloomberg:
“The tourists are definitely gone. If you’re in this, you have to understand that the volatility is there, you don’t know where it’s going from day to day, but you understand the trajectory, the adoption, etc.”
Bitcoin Spot Trading Volume
Let’s take a look at the spot trading volumes for BTC across the top two exchanges – Binance and Coinbase. At the end of March, the largest trading platform Binance saw spot trading volumes of over $6 billion with monthly visits by 65 million users.
Similarly, Coinbase saw trading volume of about $1.3 billion and 33 million monthly visits approximately. These two exchanges have come under fire from US regulators in the past two weeks. Fiona Cincotta, senior financial markets analyst at City Index said:
Bitcoin trading volumes have collapsed, “which inevitably makes for a more volatile market. The sharp drop in volumes means it’s easier for large orders to move BTC prices. So sit tight, there could be more wild swings. Falling volumes point to waning appetite for Bitcoin at recent higher levels”.
On the other hand, a large number of Bitcoins have moved off-exchange recently. According to on-chain data provider CryptoQuant, nearly 46,000 BTC have left the exchange in the past 10 days.
