Cryptocurrency exchange BloFin warns that Bitcoin price is facing high downside risk due to the current low liquidity in the market.
Low liquidity
Liquidity often serves as a benchmark for market health. Low liquidity can indicate few investors participating in the market or difficulty completing transactions, which often impacts market performance and can potentially lead to falling asset prices.
The platform predicts that the liquidity of the crypto market will remain low in the near future as investors increasingly prefer risk-free assets.
According to BloFin, the reason was the decision of the US Federal Reserve (Fed) to withdraw some liquidity from the market amid the sale of Treasury bonds, pushing yields higher.
As a result, the value of safe-haven assets such as gold, silver and the Dollar Index (DXY) has increased significantly due to increased investor demand.
“Demand for gold from central banks around the world is also increasing, keeping gold prices high as demand drives demand. Conversely, price movements of risk assets are now more influenced by hedging behavior.”
As a result, high-risk assets like Bitcoin are experiencing low liquidity, which negatively impacts their price movements. In comparison, the price of gold has recorded a modest increase of 1.15% over the past day to $2,356, while the price of BTC has dropped more than 34% over the same period to below $60,000.
BloFin warns that Bitcoin continues to face high downside risk, especially if an unexpected event occurs. The firm points out that the influence of market makers on price stability is weakening and that Bitcoin faces significant resistance at $63,000 while lacking significant support levels below this price target.
BloFin analysts concluded that investors should be cautious about the market’s potential systemic risks.
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According to Cryptoslate
