Liquidity Reduction in the Market May Challenge Bitcoin’s Rally

Bitcoin’s number one rival cryptocurrencyEthereum (ETH) manages to break its past records at the end of last week. US’s largest bank, JPMorgan is of the view that there is an alarming reduction in Bitcoin’s liquidity from the market. Says that the rally might be upset because reduced liquidity may challenge Bitcoin’s surge.

It has been discussed within the crypto community that there is an apparent reduction in Bitcoin’s liquidity from the market. According to them the situation is alarming and can put the legendary cryptocurrency’s rally to test.

Since the start of 2021, Bitcoin continues to shock and surprise the world. The value of Bitcoin continues to climb and breaking its own past records. On Sunday, 21nd February, 2021, the coin managed to rose above US$ 58,350 (it’s all-time best). However, the surge was halted and Bitcoin went back to US$ 56,200 as of Monday. Yet Bitcoin saw another fall on Monday, 22nd February, and currently being trading on for US$50,081. In the last 3 months Bitcoin managed to earn gains in triplets, however, it underwent several dips as well.

In the words of NokolaosPanigirtzoglou, an analyst of JPMorgan Chase & Co., the liquidity of Bitcoin has worsened during the surge. He suggested that if one looks at the prevailing liquidity, then noticeably Bitcoin’s liquidity is lower than S&P 500. In addition, the liquidity has even gone below the average liquidity of gold as well, he added. In his opinion, even if there is a tiny reduction in the flows, it has the potential of lowering the values greatly.

Panigirtzoglou asserted that Bitcoin has moved into a critical place where a slight change in the rally could be huge. For instance, if there is further incorporation of liquidity, then the value will spike higher. Similarly, if there is a reduction, then the value will fall on a high level as well. He stated that the best example is the reduction of Bitcoin’s value on Monday, i.e. 22nd February. When the reduction occurred, Bitcoin immediately lost more than six-thousand US Dollars in a flash, asserted Panigirtzoglou.

People like Elon Musk of Tesla took notice of this change in Bitcoin. A day ago, Musk was claiming that those who prefer cash over Bitcoin are dumb. However, in the latter part of the day, Musk tweeted that surprisingly Bitcoin’s prices were on the higher side. His statement somehow revealed that Bitcoin was undergoing unconventional and/or heretical changes.

The daily average trade volume collectively of future market and spot for Bitcoin is roughly US$ 10 Billion. On the contrary, as regards gold, the trade volume per day basis is around US$ 10 Billion. This shows that there is an apparently evident difference between the liquidities of gold and Bitcoin.

Meanwhile, Bitcoin’s traditional rival, ETH managed to set up all-time high records as it goes above US$ 2,000.

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