Bitcoin's Liquidity Dries Up: A Precursor to a Further Crash in May?

▲ Bitcoin (BTC), Investor, Crash/AI Generated Image ©

As the spot trading volume of Bitcoin (BTC), the leading cryptocurrency, plummets to its lowest level since 2023, intensifying the liquidity depletion crisis, a dark cloud hangs over the overall market, with the exception of some cryptocurrencies like XRP (Ripple), which are attracting attention with news of the introduction of a financial payment network.

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 recovery in price, market participants' trading activity has failed to revive and continues to experience a severe contraction.

The main reasons for this sharp drop in trading volume are cited as unstable macroeconomic conditions and a cooling of investor sentiment due to escalating geopolitical crises. A look at 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 painful trading volume decreases 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 US-listed exchange-traded funds, including BlackRock's iShares Bitcoin Trust, and institutional investors, with bearish sentiment dominating the market as funds flow into cryptocurrency exchanges and accelerate supply distribution.

Amidst poor trading volume, Bitcoin has fallen by 4.90% over the past 7 days, currently struggling around $75,150. The media warned that if institutional selling does not cease amidst this liquidity drought, an uncontrollable further price crash could occur in May. Meanwhile, XRP, whose role as a financial infrastructure payment network has been 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 Bitcoin's worsening investor sentiment.

*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.*