Bitcoin price rise threatened by liquidity crisis
Liquidity in the Bitcoin market is currently a major point of concern in the cryptocurrency sphere. The lack of depth in the market has led to significant price slippage when large orders are executed, resulting in erratic price swings that can overwhelm even the most experienced traders.
The cryptocurrency market is currently facing a liquidity crisis triggered by the shutdown of Silvergate’s SEN and Signature’s Signet networks in early March. Despite a rebound in Bitcoin’s price since the decline in March, which peaked around $28,900, the initial drop has raised concerns among market participants.
Lack of liquidity in an asset can cause significant market inefficiencies, resulting in severe price fluctuations that can deter experienced investors from executing trades.
Bitcoin ready for consolidation phase
In accordance CoinMarketCap dataBitcoin has seen a slight increase of 0.77% on Monday and is currently valued at $27,849. Despite the inability to reach the $30,000 mark so far, market trends suggest that Bitcoin may be preparing for a phase of consolidation.
A consolidation phase is a period where market volatility decreases and prices remain relatively stable. It usually follows a significant uptrend or downtrend, allowing the asset to take a breather before continuing the trend.
For Bitcoin, a consolidation phase could signal a time of market determination. However, it can also be a positive sign for investors as it can lead to the formation of a base for future growth.
It is worth noting that while a consolidation phase can be a positive sign for Bitcoin’s long-term growth, it is not always guaranteed to lead to an upward trend. Market conditions can change quickly, and unexpected events can disrupt even the most stable assets.
Bitcoin liquidity has hit a 10-month low
Despite Bitcoin’s impressive performance this year, investors may be concerned about the lack of liquidity in the cryptocurrency markets.
Conor Ryder from Kaiko told Bloomberg about a decline in the measure of Bitcoin’s easy buying and selling, which has hit a low not seen in 10 months.
The calculation of this metric involves evaluating the offers to buy and sell in the market maker’s order books, limited to a 2% deviation from the cryptocurrency’s current price on each side.
BTCUSD currently remains in the $27K region on the daily chart at TradingView.com
This decrease in liquidity is attributed to firms buying and selling cryptocurrency losing access to dollar payment systems, resulting in a drying up of liquidity in the market.
The fate of Bitcoin has left investors in the cryptocurrency industry on the edge of their seats.
Despite the market’s resilience in the past, the current liquidity crisis poses a formidable challenge to stability. The future of Bitcoin’s rally hangs in the balance, and it remains to be seen whether it will endure or succumb to the crisis.
– Featured image from PublishOx
