While the first cryptocurrency is slowly drifting in the range of $25,000-27,000, analysts have drawn attention to the decline in spot trading volumes and the risks of large liquidations in the derivatives market.
Where is the liquidity?
According to CryptoQuant, last week spot trading volume for the first cryptocurrency fell to 2018 levels, with between 8,000 and 15,000 transactions recorded per day during this period.
By comparison, in March of this year the average was 600,000 transactions.
According to analyst Caue Oliveira, this trend is based on the economic situation in the United States.
“One of the main reasons is the growing fear regarding the macroeconomic scenario. The actions of the US Central Bank perpetuate a constant sense of uncertainty, causing investors to expect a possible recession,” he explained.
Oliveira referred to the Fed’s policy of raising the key rate, but the Bitcoin rate did not react to the latest change.
In fact, the downward trend in spot trading has demonstrated an increase in interest in hodl. However, in this case, Bitcoin’s growth is limited due to decreased liquidity.
“Instead of looking for quick profits through short-term trading, more and more people are looking at cryptocurrencies as a long-term investment. They prefer to hold their coins, believing in their future value, rather than selling them at the first sign of profit,” Oliveira explained.
Such sentiments may turn out to be the main catalyst for the price trajectory of digital gold, the expert believes.
Previously, Binance led the anti-rating for reducing Bitcoin spot trading. According to K33, since September 1, the exchange rate has fallen by 57%.
The overall value for all platforms decreased by 48%. At the same time, spot volumes of the first cryptocurrency fell by another 8% compared to the August five-year low.
Traders suffer losses
According to Bitfinex, the Bitcoin market is experiencing increased daily volatility, which is leading to massive liquidations of perpetual futures.
Over the past week, the majority of positions closed were longs that occurred during short-term declines. For example, on September 18, long positions worth $44 million were liquidated.
This trend may continue and even worsen due to a decrease in spot trading, analysts say. The report highlights that Bitcoin is experiencing the lowest volatility in the asset’s history.
“We saw a situation where leveraged long positions in the perpetual swap markets tried to drive up the price [биткоина]but was unsuccessful due to insufficient support for purchases on the spot market,” explained Bitfinex.
According to CoinGecko, the price of the first cryptocurrency fell by 3.4% over the past week to $26,165.
Let us recall that in the second quarter of 2023, the total volume of spot trading on the 20 leading Bitcoin exchanges decreased by 36% – from $2.6 trillion to $1.66 trillion.
In September, analyst Markus Thielen of Matrixport predicted an increase in Bitcoin’s dominance as many well-known altcoins face increasing risks of falling prices.
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