Original Author: Mary Liu
Original source: BitpushNews
Bitcoin has wiped out all gains since Grayscale won the lawsuit. Market data shows that after the news of Grayscale’s victory was announced, Bitcoin once soared to more than 28,000 US dollars. It has now retraced to around US$25,700, falling 11.4 in the past 30 days. %. Some industry analysts said bitcoin could retrace to $23,000 under the cloud of low trading volume and liquidity .
Trading volume and liquidity are extremely low
Bitcoin’s trading volume and liquidity have been at very low levels recently. Bitcoin spot trading volume on centralized cryptocurrency exchanges ( CEX ) reached its lowest monthly level since October 2020 in August, according to the latest report from Bitfinex on Tuesday.
The report added: “Spot trading volume by asset has reached historic lows, and spot trading volumes have been declining across the board for several months.” Analysts at Bitfinex said that the indicator showed that “Bitcoin and the broader crypto asset space Confidence is declining."
The Bitfinex report highlighted that the crypto market currently suffers from extremely low trading volume and liquidity. This low-liquidity environment makes crypto markets vulnerable to large price swings, even if they are not heavily traded.
Derivatives trading volume is 20 times that of spot trading volume
The Bitfinex report also noted an increase in trading volume on the derivatives exchange in mid-August, corresponding to the liquidation of over $1 billion worth of leveraged positions on August 17. Bitfinex stated that derivatives have been a driving force in the current market environment.
It also pointed to data showing spot volumes contracted further than derivatives volumes. "Yesterday's data showed that derivatives trading volume on major exchanges was 20 times higher than spot trading volume," the Bitfinex report said, referring to Monday's data.
The trading volume of digital asset investment products also decreased. “Volumes across these investment vehicles fell to a combined $1.3 billion this week, 16% below the annual average,” Bitfinex analysts said.
Bitcoin derivatives show falling demand from bulls
Analyst MARCEL PECHMAN said in a tweet that Bitcoin monthly futures typically trade at a slight premium to the spot market, indicating that sellers are requesting more funds to delay settlement. Therefore, BTC futures contracts in a healthy market should trade at an annualized premium of 5% to 10%, a condition known as contango. Bitcoin’s current 3.5% futures premium (basis) is at its lowest since mid-June ( before BlackRock applied for a spot ETF). This indicator reflects declining demand from leveraged buyers using derivatives contracts.
Traders should also analyze the options market to see if the recent correction has caused investors to become less bullish, analysts said. A delta bias of 25% is a telltale sign when arbitrage platforms and market makers charge excessive fees for upside or downside protection.
In short, if traders expect Bitcoin prices to fall, the bias indicator will rise above 7%, whereas hot markets tend to see a negative 7% bias. And the option's 25% delta bias has recently entered bearish territory, with the protective put (sell) option trading at a 9% premium on September 4 compared to a similar call (buy) option.
Market pessimism continues
Market pessimism is on the rise. A brief moment of optimism faded after news of Grayscale’s legal victory with the U.S. Securities and Exchange Commission ( SEC ) broke last Tuesday . Bitcoin has since given up all its gains after hitting recent highs of $28,100.
On August 31, the SEC extended the decision period for seven ETF applications by 45 days, further dampening investor enthusiasm. There is a growing belief that the U.S. Bitcoin Spot ETF may face further delays.
The lack of sustained liquidity and trading volume has caused the key investor sentiment indicator "Fear and Greed Index" to fall into a downward trend over the past 30 days, shifting from neutral sentiment to fearful sentiment. It may take the market longer than previously expected to get a bullish catalyst.
Down to $23,000?
Given the lack of trading activity, Blackfridge Exchange CEO Mike Crosbie said in a Bloomberg interview that the market structure does not inspire much confidence. Crosbie believes: “As long as the $28,000 level remains lost, Bitcoin may fall to around $23,800.”
September has historically been a difficult time for BTC prices, with the cryptocurrency posting negative monthly returns every year since 2016. Crypto asset management firm QCP Capital predicts that the largest crypto asset could fall to $23,000 by early October.
However, K33 senior analyst Vetle Lunde said in his report that the current price level ($25,760 at press time) provides a buying opportunity for investors with a longer view. “By all accounts, this is a buyer’s market and it would be unwise not to actively accumulate Bitcoin at current levels,” he said.
(The above content is excerpted and reprinted with the authorization of partner MarsBit , original text link | Source: BitpushNews )
Statement: The article only represents the author's personal views and opinions, and does not represent the BlockCast. All contents and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and transactions, and the author and BlockCast will not be held responsible for any direct or indirect losses caused by investors' transactions.
