According to recent data, Bitcoin’s market depth and liquidity may be the reason why the king coin is still climbing in June.
The price of Bitcoin may have awakened from a prolonged slumber and has been on the rise. Since June began, Bitcoin has climbed 12% and seems ready for more upward movement.
Last Wednesday, Bitcoin crossed $28,000 after adding 5% on Tuesday. At the time, observers believed BlackRock’s application for a spot Bitcoin ETF was a major push behind the spike. The giant investment company and asset manager had submitted an application for the iShares Bitcoin Trust ETF the week before.
Another factor thought to be responsible for the rise in Bitcoin’s price is a flurry of Bitcoin ETF applications recently submitted to the United States Securities and Exchange Commission (SEC). Recently, the SEC has received applications from WisdomTree, Invesco, and Bitwise. Unfortunately, the Commission has rejected all applications spot Bitcoin applications since the Winklevoss Bitcoin Trust filed the first proposal in 2013.
The continued request for spot Bitcoin ETFs despite the SEC’s reluctance, as well as involvement from traditional firms, is considered a push for Bitcoin. According to the CEO and co-founder of DeFi platform Umee, Brent Xu, these institutions are interested in large exposure to digital assets. Xu also believes that their client bases are pushing for Bitcoin access.
Liquidity May be Responsible for Bitcoin’s June Climb
Interestingly, the ETF applications and traditional interest in Bitcoin may not be the only reason for Bitcoin’s rise in June. There is also the problem of market depth.
Market depth is a market’s capacity to absorb large market orders without a significant impact on an asset’s price. Market depth measures a market’s liquidity which, when low, could result in a substantial price shift in reaction to relatively large orders.
At the moment, Bitcoin’s market depth is low. According to data company Kaiko, Bitcoin has lost 20% of its market depth since January. Kaiko data reveals that Bitcoin’s market depth fell nearly 40% sometime in March.
CCData head of research Jamie Sly believes Bitcoin’s June climb is due to the market’s inability to absorb orders. Sly said:
“Bitcoin’s recent surge in value has largely been driven by large trades within a less liquid market…Our analysis of market orders over 5 BTC reveals an aggressive surge in market buying, suggesting large players are seeking to gain exposure to digital assets…When combining large orders with thin books, the market is subject to more volatile movements.”
At the moment, trading volumes across crypto exchanges are low. CoinGecko data put the trading volume at nearly $24 billion, down from the over $100 billion recorded during the 2021 crypto rally. Bitcoin traded at around $69,000 then, compared to the current price above $30,000.
The low trading activity and seeming distance of retail traders from trading may be because of the SEC. The Commission has recently been harsh on crypto giants and has launched lawsuits against Binance and Coinbase. Early this month, the SEC accused Binance of commingling user funds and deliberately violating US laws on trading and operations. The Commission also indicted Coinbase for operating as an unregistered national securities exchange and broker.
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