Bitcoin market liquidity continues to tighten as crypto currency consolidates following a massive correction since its February high above $102,000.
Glassnode’s data on the chain shows that both futures and spot markets are experiencing a decline in liquidity.
Exchange inflows—a key measure of market activity—have dropped more than 54% from their cycle peak, reflecting lower investor participation, Glassnode wrote in a Report the issue Tuesday is the day.
Open interest in Bitcoin Futures fell by 35% from the all-time market high of $57 billion to just $37 billion. This indicates a decrease in leverage and speculation.
CoinGecko shows that this asset has dropped 23% since the all-time record high of $109,800 on January 20. It also fell 15% during the past thirty days and is now at $82,800.
A major factor contributing to the liquidity crunch appears to be an unwinding of the cash-and-carry trade—a strategy in which traders arbitrage Bitcoin’s price premium in CME futures relative to spot prices.
The analysts also point to the shift in sentiment about macroeconomic events abroad. They have shifted from their knee-jerk reaction earlier in the week to the President Donald Trump’s remarks. Tariffs.
In the absence of new tariff headlines the geopolitics is back in the spotlight, wrote Singapore’s digital asset trading company QCP Capital. Note: Tuesday is the day.
Israel has resumed its strikes against Gaza, following the temporary ceasefire. pushed gold Bitcoin is continuing to show a negative correlation, with Bitcoin prices soaring above $3,000,” the report said.
Institutional players have reduced their holdings as the market has entered a mode of risk reduction. The result is a decrease in ETF flows and resulting further pressure to Bitcoin’s price.
Put options carry higher implied volatility premiums compared to equivalent call options.
Some Short-Term Investors have capitulated due to the unrealized losses.
Glassnode stated that Long-Term Holdings are largely inactive despite the larger sell-off. The inactivity suggests that long-term belief in Bitcoin’s worth proposition has not changed.
Glassnode’s report shows that at this stage of the cycle, this group still controls a large share of wealth in the network. This is an unusual trend.
Bitcoin faces a difficult balance: declining liquidity, and decreasing speculative interest could cause volatility to remain high in the near future.
Traders are assessing macroeconomic factors and a broader risk climate.
