Dangerously low bitcoin liquidity seems to be having a negative impact on spot prices right now, with BTC/USDT starting to test the 26k threshold for the first time in nearly two months.
Although not quite there yet, Thursday’s 2.2% drop has continued through morning Asian trade, with the pair falling another 2.4% to $26,380.
Liquidity crisis hits bitcoin – Source: currency.com
Prominent market players including Jump Crypto and Jane Street have begun to pull back from the crypto markets, but falling liquidity has been a concern for some time due to an orgy of bearish factors, from the spate of deadly collapses last year to a regulatory crackdown in the US this year.
Earlier this week, Henry Elder, head of decentralized finance at Wave Digital Assets, told Bloomberg: “We are currently in an environment of very low liquidity. And to a large extent that is caused by the withdrawal of market participants from the market, because the regulatory picture in America has become so foggy.”
Long-BTC liquidations have started to pile up as a result of the bearish reversal, with another $23 million worth of bullish bets wiped from the market today.
Apart from liquidity issues, regulatory pressures continued to cause turmoil in the crypto markets.
Binance and Coinbase, the two largest cryptocurrency exchanges globally, are growing increasingly frustrated with the US approach to enforcement, further underscored by news that Binance founder Changpeng ‘CZ’ Zhao is seeking to reduce his stake in Binance’s US unit.
Equally bored, Coinbase is increasing its presence outside the US. All this uncertainty among the major fiat-to-crypto ramps can only make the current liquidity crisis worse.
With lower liquidity swirling around, crypto traders should prepare for increased volatility.
Ethereum fell to a six-week low of $1.7400, although bulls have since recovered to $1.770, thanks to some fairly strong buy orders at the lower end of the 1.7k channel.
Week by week, bitcoin and ether are down 9.2% and 7% respectively.
Altcoins are closing the gap
Looking over the past seven days, we’ve seen blue-chip altcoins pare their losses against the benchmark.
Cardano (ADA), Ripple (XRP) and BNB, for example, have actually improved against bitcoins, both falling close to 6%, while Dogecoin (DOGE), Polkadot (DOT) and Litecoin (LTC) are between 8% and 9 % down.
However, it should be noted that the broader picture certainly does not indicate an altcoin season, with 42 of the 48 best-performing cryptocurrencies still in the red and underperforming against bitcoin and ethereum.
Source: blockchaincenter.net
