Proactive Investors - Dangerously low bitcoin liquidity appears to be having a negative impact on spot prices right now, with BTC/USDT beginning to test the 26k threshold for the first time in nearly two months.
Though not quite there yet, Thursday’s 2.2% dip has continued throughout this morning’s Asia trades, with the pair falling another 2.4% to US$26,380.
Liquidity crunch hits bitcoin – Source: currency.com
Prominent market makers including Jump Crypto and Jane Street have started to retreat from the crypto markets, but declining liquidity has been a concern for a while 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 decentralised finance at Wave Digital Assets, told Bloomberg: “We are currently in a really low liquidity environment. And in large part it’s been caused by the withdrawals of market makers from the market, because the regulatory picture in the US has gotten so hazy.”
Long-BTC liquidations have started to pile up as a result of the bearish turn, with a further US$23mln of bullish bets wiped from the market today.
Aside from liquidity issues, regulatory pressure continued to cause jitters in the crypto markets.
Binance and Coinbase (NASDAQ:COIN), the two largest cryptocurrency exchanges globally, are becoming increasingly frustrated by the US’s approach to enforcement, further underscored by news that Binance founder Changpeng ‘CZ’ Zhao is seeking to reduce his stake in Binance’s US entity.
Equally fed up, Coinbase is increasing its non-US presence. All this uncertainty among the major fiat-to-crypto on-ramps can only make the current liquidity crisis worse.
With lower liquidity swirling about, crypto traders should brace for heightened volatility.
Ethereum fell to a six-week low of US$1,7400, though bulls have since mounted a recovery to US$1,770, thanks to some pretty strong buy orders at the lower end of the 1.7k channel.
Week on week, bitcoin and ether are down 9.2% and 7% respectively.
Altcoins close the gap
When looking over the past seven days, we’ve seen the blue-chip altcoins narrow their losses against the benchmark.
Cardano (ADA), Ripple (XRP) and BNB, for instance, have actually improved against bitcoins, both having fallen closer to 6%, while Dogecoin (DOGE), Polkadot (DOT) and Litecoin (LTC) are between 8% to 9% down.
However, it should be noted that the wider picture certainly does not denote an altcoin season, with 42 of the 48 best-performing cryptocurrencies still in the red and vastly underperforming against bitcoin and ethereum.
Source: blockchaincenter.net
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