Bitcoin's liquidity is vanishing, paving way to increased volatility
- Digital asset strategy from VanEck says that Bitcoin may be vulnerable to sharp movements.
- Low liquidity and widespread lead to high price volatility.
The bitcoin market is plagued with decreasing liquidity amid growing volatility It means that the market is vulnerable to sharp and unexpected moves in either direction. VanEck's digital asset strategist Gabor Gubach pointed out to the fact in his recent tweet.
Bitcoin liquidity evaporating fast as indicated by the sharp widening of bid-offer spreads on a sample $ 10million trade. Bid-offer spreads widest in the past 3 months. Be careful out there. Market can snap fast in any direction. Ease into positions. Avoid large/any market orders, he wrote.
He also mentioned that lager orders to the tune of $10 million are often placed by market-makers of OTC-desks. Also, small recurring transactions quickly gain a similar amount and have the same impact on the market, he added.
He noted, that in the early years of bitcoin, a high spread between bid and ask prices was rare, since the market was small and liquidity was low.
Notably, on Monday Bitcoin fell to $5,626 and recovered to the area above $7,000. At the time of writing, BTC/USD is changing hands at $7,150.
Author
Tanya Abrosimova
Independent Analyst
