Bitcoin's Liquidity Dries Up: A Precursor to Further May Plunge?

▲ Bitcoin (BTC), investors, crash/AI-generated image ©

The spot trading volume of Bitcoin (BTC), the leading cryptocurrency, has plummeted to its lowest level since 2023, exacerbating the liquidity crunch. A thick cloud of gloom hangs over the overall market, with the exception of a few cryptocurrencies like XRP (Ripple), which is attracting attention with news of its adoption in financial payment networks.

According to the cryptocurrency media outlet Finbold on April 29 (local time), Glassnode data analysis shows that the spot trading volume of Bitcoin on major cryptocurrency exchanges has fallen below $5 billion, returning to October 2023 levels. Despite Bitcoin's recent slight price recovery, market participants' trading activity has failed to revive and continues to experience a severe contraction.

The main reasons for this sharp decline in trading volume are cited as the unstable macroeconomic situation and the cooling of investor sentiment due to escalating geopolitical risks. CryptoQuant data further highlights the severity of the situation. Binance, the world's largest exchange by trading volume, saw its spot trading volume evaporate by a staggering $25 billion over the past month, while Gate.io and OKX also suffered significant trading volume reductions of $13 billion and $6 billion, respectively.

As liquidity, which signifies market depth, thins out in this manner, Bitcoin's price has entered a pre-storm state, becoming extremely sensitive to even small capital movements in the spot market. Indeed, selling pressure is intensifying again among major U.S. exchange-traded funds, including BlackRock's iShares Bitcoin Trust, and institutional investors. Bearish sentiment dominates the market, with funds flowing into cryptocurrency exchanges and accelerating the distribution of assets.

Amidst poor trading volume, Bitcoin has fallen by 4.90% over the past seven days and is currently struggling to hold its ground around $75,150. The media warned that if institutional selling continues amidst this liquidity drought, an uncontrollable further price plunge could occur in May. Meanwhile, XRP, whose role as a financial infrastructure payment network was re-highlighted through an internal announcement by the Bank for International Settlements, is once again a topic of market discussion, garnering attention in contrast to the deteriorating investor sentiment for Bitcoin.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*