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- Bitcoin’s price performance in recent weeks continues to cause concern.
- It appears that traders are increasingly unsure of the direction of the asset’s price.
- Recent reports give a clearer picture of the driving force behind the daily volatility of the asset.
Despite the strong showing in the first quarter of 2023, Bitcoin’s price action in recent weeks has been so It raised concerns and raised eyebrows in some cases. The price of the asset has fluctuated significantly, They often erase gains faster than they are made.
While bitcoin price is off to a positive start this week, bouncing from under $26,000 over the weekend to nearly $27,500 at the time of writing, the price action has left traders unable to predict the direction of the asset’s price.
Traders stumbled
“What is Bitcoin doing here? Has anyone got a clue?” crypto trader “Duo Nine” tweeted on Monday, May 15, sharing the daily bitcoin price chart.
While bitcoin price initially seemed to be validating a head and shoulders chart pattern identified by an experienced trader, the price took a sharp turn before reaching the set target. The trader shared the trade idea on Friday, May 12th, predicting a drop below $25,000 if validated. But Bitcoin’s sharp decline after breaking the neckline of the chart pattern has now given the technical price analyst pause for thought.
Duo Nine isn’t the only veteran trader stumbling over the asset’s price movements. IncomeSharks confirmed that another month of price action is needed to determine the Bitcoin price direction.
# Bitcoin Is this a wedge or a downward channel? We need another month of price action for it to become more clear. Either way, I’m waiting for the buy zone and will swing trade until he makes up his mind pic.twitter.com/Wq8bwD3k6c
– IncomeSharks (IncomeSharks) May 15, 2023
While merchants love Duo Nine suggest at first Bitcoin’s recent price volatility has resulted from price manipulation, new reports point to low liquidity as the main culprit.
FTX/Alameda and Bank Crashes Collapse Cryptocurrency Liquidity
Liquidity refers to the ease with which an asset can be traded without significantly affecting its price. The lower the liquidity of an asset, the more volatile its price and the more susceptible it is to manipulate.
Cryptocurrency market liquidity has been declining in recent months, spurred by the FTX/Alameda crash in November 2022 and the collapse of crypto-friendly banking in March 2023, according to Keiko Research Analyst Connor Rider. The closure of 24/7 instant settlement services such as the Silvergate Exchange Network (SEN) of Silvergate Bank and Signature Bank has particularly affected the capacity of Market makers To access settlements in US dollars.
“The lack of instant settlement is detrimental to capital efficiency,” Ram Ahluwalia, CEO of Wealth Management at Lumeda, emphasized in a Twitter thread highlighting the impact of the closure of spot bank settlement services on cryptocurrency market makers.
1/ The liquidity of the cryptocurrency market has dried up dramatically.
These are the consequences of not having a SI & Signature Bank Settlement Layer.
Market makers need a way to instantly settle with counterparties (eg exchanges, HFs, other MMs).
🧵
– Ram Ahluwalia, higher for the longest-running CFA cryptocurrency (@ramahluwalia) May 15, 2023
Concerns about the liquidity of the cryptocurrency market escalated after a bloomberg a report On May 9, leading market makers Jump Crypto and Jane Street scale back cryptocurrency trading due to regulatory uncertainty.
on the flip side
- No one can predict the direction of any market with 100% certainty.
- Some investors Argues Liquidity concerns are exaggerated as long as on-chain liquidity continues to grow.
Why should you bother
The broader crypto market is closely related to bitcoin. The growing uncertainty about the direction of the asset’s price is clouding the price performance of other digital assets.
Read this to learn more about the circumstances surrounding Bitcoin’s recent wild swing:
Why Bitcoin Dropped 5% To $26K Within Minutes: Fake News To Blame?
Binance’s Changpeng “CZ” Zhao intends to sell his shares in Binance.US. Find out why:
Binance CZ to reduce stake in US business due to regulatory concerns
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