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The price action of Bitcoin (BTC) in the past couple of days has taken bulls and bears in for a surprise. On 25th April, BTC began its rally upward rapidly and raked in 9% gains under just 20 hours teasing the strong resistance level at $30,000. However, the euphoria was short lived as the BTC market capitulated by more than 8% completely wiping out same-day gains in 4 hours. Generally, the market sentiment turns bearish post such capitulation but the spot bulls seemed to have another plan. After reaching a low of $27,230, BTC has crawled its way back above $29,000 as of today.
It was estimated that close to $300 million of BTC was flushed out in 45 mins during the largest red candle recorded yesterday in over a month. While today’s move is driven by spot, investors need to be cautious about using leverage. Ethereum (ETH), following market leader’s signal, rallied to the $1900’s. Rest of the altcoin market responded with low to very moderate gains with a few coins like Injective Protocol (INJ) and MultiversX (EGLD) gaining 9.7% and 18.2% respectively over the last day.
Despite the rally in March, crypto trading volume levels are still far from levels reached during 2021. According to crypto analysis firm Reflexivity Research, three things have shaped up majorly to the current market dynamic. First is the FTX collapse which left a catastrophic impact across the entire crypto ecosystem. Second, volumes have declined on major exchanges including the world's largest Binance. Coinbase is slated to launch its offshore derivatives exchange soon that could challenge Binance’s market dominance.
With regulatory uncertainty and concerns around counterparty risk, liquidity across all BTC and ETH trading pairs measured by 2% market depth has been on a continuous decline post FTX collapse. This decreased liquidity coupled with less efficient price movements will prove difficult for large players to operate in crypto space for the time being. However this could be an advantage for new market entrants to take advantage of the decrease in market efficiency.
Overall, less liquidity in the market paired with leverage build ups can lead to increased volatility. And yesterday’s price action was a great example of the same.
Microsoft shares rose 9% in extended trading on Tuesday after the leading software maker issued fiscal third-quarter results and quarterly guidance that exceeded analysts predictions. Tech stocks rallied soon after the news and the bullish wave took BTC also for a ride reclaiming $29,000 once again.
From a larger perspective, the BTC market is shifting from a regime of prolonged losses into profitability as suggested by key metrics such as Net realized PnL adjusted for market capitalization, long-term holder SOPR etc.
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.