Bitcoin Liquidity Drops To 10-Month Low Amid US Bank Run
The banking crisis has hit US-based exchanges hardest, with traders struggling with heightened price volatility. Furthermore, Bitcoin BTC Ticker Drops $28,083 Despite a bullish quarter driven by rising prices.
Market liquidity has fallen to a 10-month low. The liquidity drain is partly due to the crackdown on banks in the U.S. and ongoing regulatory action against cryptocurrency companies.
Key Takeaways
- The banking crisis has hit US-based exchanges hardest.
- BTC’s price will increase by 45% in 2023.
- The liquidity crisis has increased price volatility, forcing traders to pay more fees for slippage.
BTC’s price will increase by 45% in 2023, making it one of the best-performing assets. The upside comes amid a looming financial crisis in traditional finance, where stocks and bonds are enjoying one of their worst years. Several banks failed as the economic situation worsened.
@ConorRyder TWEET
The banking crisis has also had a direct impact on the crypto ecosystem. The collapse of crypto-friendly banks like Silicon Valley Bank and Signature Bank has removed major U.S. dollar payment lanes for cryptocurrencies, creating a liquidity crisis, especially on U.S. exchanges.
The liquidity crisis has increased price volatility, forcing traders, to pay more fees for slippage. Slippage refers to the difference between the expected price of a trade and the fully executed price.
A $100,000 sell order jumped the BTC/USD pair’s slippage by 2.5x on Coinbase in early March, while his BTC/USDT pair divergence on Binance barely moved during the same period.
The liquidity crisis has also increased price volatility on U.S. exchanges, with price differentials between the BTC and USD pair widening significantly compared to non-U.S. exchanges. For example, his BTC price on Binance.US is more volatile than the average price on ten other exchanges.
Connor Ryder, Head of Research at Kaiko, an on-chain data analytics firm, explained the dramatic impact of the liquidity crisis on traders, and markets.
He pointed out that stablecoins are replacing the U.S. dollar pair, which, while mitigating the effects of U.S. banking troubles, is hurting U.S. liquidity. He added that would indirectly hurt investors there.
The liquidity of Bitcoin refers to the ease with which investors can buy and sell their digital assets without causing significant price changes.
A high level of liquidity is usually seen as a positive sign of market health, allowing investors to move in and out of positions quickly. Conversely, a low level of liquidity can indicate market uncertainty or a lack of investor confidence.
The drop in Bitcoin’s liquidity comes amid growing concerns about the effect of Evergrande’s financial troubles on global markets. The firm reportedly struggles to repay its debts and even warned investors that it may default on its obligations.
This has led to panic among some investors, who have been rushing to withdraw their funds from the company’s subsidiaries and banks.
Some investors are turning to other cryptocurrencies that offer greater liquidity and stability. One such cryptocurrency is a stablecoin, pegged to the value of fiat currency like the US. dollar. Stablecoins are less volatile than other cryptocurrencies and offer a way to quickly move in and out of positions without causing significant market movements.