- According to CoinDesk data, Bitcoin was trading at $26,312.23 around 5:09 a.m. ET after falling below $27,000 on Thursday. This is the lowest level since March 17.
- The crypto markets are currently facing a number of issues including low liquidity, a crackdown on the industry by US regulators and macro headwinds.
- The liquidity situation could get worse after Bloomberg reported that Jane Street and Jump Crypto, two of the largest crypto market makers, will take a step back from crypto trading in the US
Bitcoin faces a number of headwinds, including low liquidity, which contributes to volatility. US regulators are also scrutinizing the crypto industry.
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Bitcoin traded at its lowest level since mid-March on Friday as volatility continued to weigh on cryptocurrency markets due to low liquidity.
According to CoinDesk data, Bitcoin was trading at $26,312.23 around 5:09 a.m. ET after falling below $27,000 on Thursday. This is the lowest level since March 17.
Ether, the second largest digital currency by market cap, also fell on Friday.
The crypto markets are currently facing a number of issues including low liquidity, a crackdown on the industry by US regulators and macro concerns.
Bitcoin is up around 59% this year, but prices remain volatile as low liquidity amplifies ups and downs.
Clara Medalie, Research Director at Kaiko, said there has been a “notable drop in market depth” for Bitcoin.
Market depth is the ability of a market to accommodate relatively large buy and sell orders. When market depth is shallow, relatively small orders can cause the price of an asset to rise or fall significantly.
And the liquidity situation could get worse after Bloomberg reported that Jane Street and Jump Crypto, two of the largest crypto market makers, will take a step back from crypto trading in the US as the country’s regulators continue to crack down on the burgeoning industry .
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“While the trigger for today’s sharp drop remains unclear, volatility is to be expected given the current liquidity situation, particularly after larger market makers Jane Street and Jump Crypto announced they were reducing their exposure to crypto,” Medalie said.
Liquidity has been a major concern for crypto markets since the shutdown of Silvergate and Signature Bank, two major platforms that people used to buy into the crypto market.
Since the collapse of crypto exchange FTX last year, US regulators have increased their scrutiny of the digital currency industry.
The U.S. Securities and Exchange Commission warned American crypto exchange Coinbase in March of potential violations of securities laws. Coinbase CEO Brian Armstrong said the company is bracing for a year-long court battle with the SEC.
Meanwhile, in March, the Commodity Futures and Trading Commission claimed that crypto exchange Binance violated trading rules.
The crypto industry is at odds with US regulators, accusing the SEC and the US government of not setting clear rules.
Meanwhile, the Bitcoin network itself has faced congestion over the past few days as Binance was forced to temporarily suspend Bitcoin withdrawals last week. Bitcoin transaction fees have skyrocketed this week and while falling, they still remain at high levels. The original Bitcoin network was not designed to handle large-volume transactions.
“Bitcoin’s attempts to breach $30,000 have stalled amid a triple burden of congestion issues on the blockchain, liquidity shortages caused by the downsizing of top market makers Jane Street and Jump Crypto, and constantly circling regulators,” says Antoni Trenchev, co-founder of Nexo, told CNBC via email on Friday.
– CNBC’s Tanaya Macheel contributed to this report.