The reason why the price of Bitcoin, although increasing, is unsustainable

This article is machine translated
Show original
Here are 3 signs that Bitcoin price is very sensitive and easily "volatile" at any time despite a strong increase in the first quarter of 2023.
Article table of contents
  1. Bitcoin Market Depth Drops To New Lows
  2. Retail investors are increasing their holdings
  3. 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).

Bitcoin Market Depth Data.

“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.

VIC Crypto synthesizes

Related news:

enlightened CZ brokered a Bitcoin bet that reached 1 million USD within 90 days

enlightened Bitcoin Whales Unexpectedly Move Massive Assets: Is Pump-Dump Signaled?

enlightened Transaction error on Binance caused Bitcoin to lose nearly 2% of its value: CZ quickly stated that “the fund is #SAFU”

Source
Disclaimer: The content above is only the author's opinion which does not represent any position of Followin, and is not intended as, and shall not be understood or construed as, investment advice from Followin.
Like
Add to Favorites
Comments