Crypto News – The price of Bitcoin (BTC) has increased to $36,300 over the last few weeks.
The Price of Bitcoin Continues to Rise, but Low Liquidity Draws Attention
It is all due, of course, to the excitement surrounding the impending launch in the US of the spot Bitcoin exchange-traded fund (ETF), which at this moment appears to be just a matter of time. The peculiar thing about all of this expansion, though, is that liquidity is currently relatively low, hovering around levels seen in Q4 2022.
The liquidity of Bitcoin is currently at the level observed following the collapse of FTX in November 2022, as per data from Kaiko. As previously reported by BeInCrypto, trade volume has not greatly rebounded, in addition to market liquidity.
Although BTC rallied more than 20% in October, the ‘Alameda gap’ has persisted. Market depth remains well below its pre-FTX levels.”
Alameda Research, Sam Bankman-Fried’s empire’s trading division, failed following the demise of FTX. The outcome was a 60% decline in “market depth,” and Bitcoin hasn’t recovered yet.
What Does Declining Liquidity Mean?
This basically suggests that higher price changes can usually be produced with fewer quantities of cash. However, not all of this is good news because there is a chance that some short selling will drive down the price of bitcoin. Therefore, when it comes to Bitcoin, market participants need to exercise extra caution.
Some do, however, believe that if the Bitcoin spot ETF is approved, liquidity will return. Liquidity is gradually but steadily rising back to previous levels. An additional increase in market liquidity may result from the potential approval of a spot Bitcoin ETF. The reason this increase in liquidity matters is that big investors especially need it.