Key Insights:
- Bitcoin may come crashing down again, and investors should be prepared
- According to analyst Nicholas Merten, Bitcoin is seeing a downward trend of -3200 on the cumulative volume delta
- Bitcoin liquidity has also decreased to its lowest point in ten months
- trading volumes have reduced by 90% and liquidity for the bitcoin-tether pair on Binance has dropped by 70%
- Bitcoin slippage has also increased
Bitcoin now appears to be closer than ever to rallying to the upside and reclaiming the price levels it has been losing since November 2021. In the first half of 2023 alone, the cryptocurrency has broken through the $20,000 zone to the upside again and is now pushing $30,000.
However, it might be a bad idea to “assume” that all is well, and Bitcoin will somehow rally straight up to $65,000 again, without any hitches. This article will focus on three of the most prominent signs that Bitcoin’s bullishness may only have been a massive bull trap.
How likely is Bitcoin to come crashing down again soon?
Let’s find out!
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Analyst “Not Too Confident” About Bitcoin Price
In a youtube video reaching more than half a million subscribers, popular analyst, Nicholas Merten mentioned that he’s “not too confident” that Bitcoin can rally up much higher than it currently has.
This is understandable, given Merten’s reasons.
In the video, the analyst mentioned that “the risk-on indicators like the ETH/BTC charts, are signalling that altcoins like Ethereum are underperforming against Bitcoin.”
This is a bad sign according to Merten, because “this is the first sign that there is a strong direction toward Bitcoin rather than the broader crypto space.”
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In essence, the analyst is saying that Bitcoin performing much better than the altcoins means that there is a special focus from investors on Bitcoin, rather than equally through the entire crypto market.
This signal, according to Merten, isn’t even the most disturbing of all, because price movements like these are typical of bull markets.
The disturbing news, he says, is that “after multiple months of having red sell-side pressure, we finally had two upward weeks of cumulative volume delta.”
Merten went further to say that we are now seeing a “downward trend” of -3200 on the cumulative volume delta.
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For context, the Cumulative Volume Delta (or CVD) measures cumulative changes in the volume traded by sell aggressors versus buy aggressors.
This means that if the CVD is negative, it means that there is more selling pressure.
Bitcoin May Nosedive During Binance vs CFTC Battle
Bitcoin’s price plunged from $29,000 to the $26,500 zone this week, after regulatory challenges emerged for Binance, the largest centralized crypto exchange in the world.
This news even seemed to affect the dollar index, which fell to about $102.6 around the same time.
Binance and its CEO, Changpeng CZ Zhao were accused of “breaking derivatives laws”.
The Securities and Exchange Commission (SEC) and the Internal Revenue Service are also some of the other US agencies looking into Binance, the largest exchange in the world (IRS).
According to statistics from Kaiko, Bitcoin liquidity has also decreased to its lowest point in ten months. And although the cause of this decline in liquidity is unclear, it may be the start of a short and painful Bitcoin drop.
Binance stopping zero-fee trading for nearly all of its bitcoin trading pairs last week has also significantly impacted liquidity.
According to Kaiko figures, trading volumes have reduced by 90% and liquidity for the bitcoin-tether pair on Binance has dropped by 70% since the announcement.
Bitcoin Slippage Has Increased
Bitcoin trading slippage has also increased recently and is a major cause for concern.
Slippage is a liquidity parameter that measures how much a trade’s price fluctuates from placement to execution.
Kaiko claims that slippage for acquiring Bitcoin (BTC) on Coinbase using U.S. dollars has increased by 2.5 times since the beginning of March.
The slippage for hypothetical $100,000 sell orders on Bitcoin has quadrupled over the past month. This means that the average price one receives per Bitcoin traded is lower than it was a month ago, according to Kaiko.
Disclaimer: Voice of crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.
