Bitcoin saw a 3% fall in its price on Thursday, closing at $26,937.29, while ether also lost 3.1% to trade at $1,793.82. This comes after institutional liquidity providers, Jane Street and Jump Crypto, decided to pull back from their crypto-trading businesses in the US following regulators’ crackdowns on the cryptocurrency industry. The move prompted concerns about liquidity risks associated with crypto firms, with CEO of Enclave Markets, David Wells, saying larger market makers create more stability in prices due to the liquidity they provide. Market analysts have been looking at $25,200 as a key threshold before worrying about a significant drop in the value of Bitcoin.

In the last week of February, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of Comptroller of the Currency raised concerns with banks about the liquidity risks associated with banking cryptocurrency firms. The market is now seeing the effects of this warning, combined with the closure of Silvergate and Signature Bank, the two main fiat onramps into the crypto market. Bitcoin had hit $30,000 a month ago for the first time since June but has since floated between that threshold and the upper part of the $26,000 level.

The effects of large institutional liquidity providers moving away from crypto-trading businesses are not yet fully known. However, both companies did confirm they would continue trading crypto in other markets, giving hope that it would not have too significant an impact. Experts have pointed out that since the order books are thinner due to the reduction in liquidity providers, the market is much more likely to see larger swings in prices in the near future, causing more frequent gaps up and down as a result.

These illiquid market conditions have not yet impacted investors, who have been unfazed by the down moves. However, the risk of more substantial price drops is causing market analysts to watch for any adverse effects on the value of the currency. The key concern is whether or not there will be enough market makers to provide the necessary liquidity to maintain the stability of crypto prices. However, data provided by Coin Exchange suggests that despite the regulated crackdown on cryptocurrency, the market continues to grow, with both Bitcoin and ether significantly increasing in value over the past year.

The crypto market has always been volatile, and the high risk associated with it has been a deterrent for some investors. The increase in regulation has caused some suppliers to leave the market, creating more significant instability and uncertainty for investors. Some investors believe in the potential of cryptocurrency and see this time of market turbulence as a chance to buy into the market at lower prices. However, the voices of dissent are growing louder, warning potential investors of the high risks associated with crypto currency. The reality is that the crypto market appears to have reached a saturation point, and unless the underlying technology is more urgently adopted by policymakers and governments, the market will remain volatile and potentially unsustainable.

Similar Posts

Leave a Reply