Bitcoin
Other cryptocurrencies also fell on Tuesday, in a correction across digital assets following Bitcoin's all-time high last week. Even though analysts and traders remain optimistic about the outlook, prices could fall further and become more susceptible to a flash crash amid volatile liquidity in the crypto market.
Bitcoin's price has fallen 6% in the past 24 hours to $62,600, with the largest digital asset trading at a recent low of around $62,350. Bitcoin has corrected lower since hitting an all-time high of nearly $74,000 last week, but this level is only one level since the token topped its peak near $69,000 in November 2021. This was recorded a week later.
“Bitcoin is falling [at] It’s the lowest level in two weeks,” said Alex Kupczykevich, an analyst at broker FxPro. “A close below $65,500 would signal a move to deeper levels, i.e. a 61.8% retracement of the typical rally with a potential target around $60,000.”
The current price movement appears to be a short-term but insubstantial correction across cryptocurrencies, with profit-taking among long-term holders likely driving the decline. A contributing factor to Bitcoin's volatility can be fluctuating liquidity across trading venues, which has led to at least one flash crash recently. A flash crash is a phenomenon in which an asset trades, at least temporarily, significantly below its normal market price, often due to automated trading strategies, liquidity mismatches, or a highly unequal ratio of buyers and sellers. This is because it is.
Liquidity is an important factor in the market, allowing assets to be bought and sold quickly without sudden price fluctuations. Cryptocurrency liquidity has declined significantly since the collapse of exchange FTX at the end of 2022, but the latest digital asset rally has seen Bitcoin market depth, a key measure of liquidity, return to its pre-FTX average. said an analyst at crypto data provider Kaiko in an article. Monday memo.
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Nevertheless, not all trading venues are created equal, and the launch of a new spot Bitcoin exchange-traded fund (ETF) suggests that during periods of major change in Bitcoin, there will be fluctuating liquidity across the market. sex may be seen. This may be contributing to trading volatility, and if Bitcoin continues to sell off, another flash crash could occur.
“Bitcoin plummeted overnight to $8,900 on one exchange (BitMEX) due to large sell orders totaling $55.5 million,” analysts at Bespoke Investment Group wrote in a note on Tuesday. Stated. “For a $1 trillion-plus asset class, a $55 million sell order causing a crash of this magnitude certainly doesn't suggest a lot of liquidity.”
That said, many market participants remain optimistic about Bitcoin's long-term prospects.
First, Bitcoin continues to be supported by inflows to the Spot Bitcoin ETF, which was approved by US regulators in January and ushered in a new wave of investor interest in the cryptocurrency. Last week, weekly inflows into digital asset investment products hit a record $2.9 billion, bringing year-to-date inflows to $13.2 billion, according to data from asset management firm CoinShares.
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Furthermore, the so-called halving is scheduled for next month, and a decrease in the amount of Bitcoin issued is imminent.While demand is increasing, new token issuance is decreasing, and supply is tight, which will cause the price is likely to support the
Risk sentiment in the broader market is resilient;
S&P500
and
Nasdaq
Stock indexes remain near record highs, and cryptocurrencies, which are sensitive to growing risk appetite, are also getting a boost. That said, a pullback in tech stocks amid Tuesday's risk-off mood in the market could further weigh on token prices in the short term.
Beyond Bitcoin
ether
The second-largest cryptocurrency by market value, which was trading above $4,000 last week, fell 8% to $3,250. Smaller tokens, or altcoins, were also weaker:
cardano
decreased by 6%;
polygon
A 9% plunge.No meme coins were spared.
dogecoin
9% decrease;
Shiba Inu
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7% off.
Email Jack Denton at jack.denton@barrons.com.
