- Bitcoin Market Depth Drops To New Lows
- Retail investors are increasing their holdings
- Bitcoin Liquidity on Binance plummeted
Bitcoin Market Depth Drops To New Lows
After the FTX crash, Bitcoin's market depth data plummeted. However, in the first quarter of 2023, this index dropped even more (marked in red).
“Why is it that the lower the depth of the market, the more volatile the price is?”
Simply because then, investors are less likely to trade (buy/sell) BTC. This causes the price range to change significantly.
With the current plummeting market depth, this will be the basis for doubting whether the sheltered capital is really as abundant as many previous analysis. As a matter of fact, it doesn't take too much money to push the price of BTC up like it did last year.
Retail investors are increasing their holdings
According to the Supply Distribition Percentage chart, individual investors are holding 20% of the Bitcoin supply over the past 10 years. In particular, this index had a significant increase in the first quarter of 2023.
Distribution of Bitcoin supply in wallets with a balance of less than 10 BTC.
“Why do individual investors holding BTC affect the price of Bitcoin in a volatile way?”
Unlike funds and institutions, retail investors often invest with emotion. They easily get FOMO when the price goes up and also easily PANIC when it encounters FUD or the price goes down. They often lack a long-term strategy and are eager to see profits. Therefore, it is easy to create unstable psychology for the price line.
Bitcoin Liquidity on Binance plummeted
Liquidity is the factor that keeps prices sustainable. However, in the last days of this March, the Liquidity of the BTC/USDT pair has dropped by as much as 50% on the Binance exchange. The decrease in Liquidity can cause the price range to become larger even if only absorbing smaller volumes than before.
Liquidity of BTC/USDT on Binance.
After the crash of FTX, Binance repeatedly crashed and was noticed by the authorities. Most recently, Binance was sued by the CFTC agency. Despite this, Binance remains the most popular exchange with investors.
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