“The surge in Bitcoin liquidity is akin to a cascading waterfall, fueling optimism among analysts who believe this could be the long-awaited catalyst for a sustained price recovery, propelling Bitcoin back into the spotlight of the financial world.”
Rising liquidity in bitcoin markets over the past four months is seen as a positive sign for a sustained price recovery, according to analysts. The increased liquidity provides traders with confidence that they can easily find buyers for their assets, reducing investment risk and indicating increased demand for bitcoin. This is especially welcomed by high-ticket traders and institutions who prefer assets that offer exposure and exit options without high spreads.
David Lawant, Flacon X Head of Research, also views the increased liquidity as a positive signal for bitcoin. He believes that strong liquidity trends confirm the sustainability of the current price recovery. Bitcoin has been on an upward trajectory for the past three weeks, and Lawant is excited about the prospects of the current crypto market, especially with the potential for more favorable liquidity conditions going forward.
However, Ruslan Lienkha, Chief of Markets at YouHodler, cautioned against interpreting the present liquidity levels as a signal of a sustained period of strength for bitcoin. He mentioned that while there has been an uptick in liquidity in the crypto market, it is still uncertain if this marks the beginning of a new upward trend or just a correction within a longer period of capital outflow from the market. Lienkha referred to increased capital inflows into the cryptocurrency market and institutional cryptocurrency funds as factors contributing to the current liquidity levels.
In the past month, the market capitalization of bitcoin has increased by $140 billion, and bitcoin-based funds have experienced net inflows of almost $410 million. Lienkha pointed out that while the overall liquidity in the crypto market is close to the levels seen in April 2023, liquidity specifically for bitcoin may be at a 1.5-year high due to the token market cannibalization caused by bitcoin’s steady increase in market share.
As of now, bitcoin has traded flat over the past 24 hours, with a price of $34,383 at 1:30 p.m. ET. It is important to note that this article is provided for informational purposes only and should not be used as legal, tax, investment, financial, or other advice.
Source: The Block