Bitcoin (BTC), the world’s most popular cryptocurrency, remained stable over the weekend.
After surging by nearly 8% over the past week, the asset appears to have stabilized below $29,000. This, Monday, BTC was trading at $28,450, with a slight increase of 0.30% in the last 24 hours.
While BTC has seen a surge of almost 70% throughout this year, making it the best-performing asset in the first quarter compared to a basket of other risk assets, analysts are concerned about the risks of low liquidity in the asset.
As reported last week, the crypto market is growing concern over the lowering liquidity in BTC.
The market-leading asset reached 10-month-low liquidity, causing investors have been paying more in trades due to slippage, which is a sign of worsening liquidity.
The reduced availability of liquid assets can be partially attributed to both the bank run that occurred in the United States and the continuous regulatory actions taken against companies operating in the cryptocurrency industry.
This means that the more difficult the trading, the greater the exposure to possible volatile price swings.
Low liquidity can occur due to a change in the buy-sell spread between the moment a trade is placed and filled, or when there is not enough depth in the order book to fulfill large orders. This can lead to a lack of buying or selling interest and result in sudden price changes.
In addition to liquidity concerns, a growing regulatory crackdown in the United States and the collapse of some “crypto-friendly” banks have also moderated the enthusiasm of some investors. This has contributed to a decline in trading volumes and increased price volatility.
On the other hand, the cryptocurrency market appears to have become more “resilient” against government economic forces. For example, over the past couple of U.S. interest raises — BTC did not suffer any catastrophic losses.