Bitcoin Price Affected by 3 Key Liquidity Factors: Full Details

Bitcoin Price Affected by 3 Key Liquidity Factors: Full Details

According to Ki Young Ju, founder and CEO of CryptoQuant, three major buy-side liquidity channels now influence the price of Bitcoin: fiat currencies, stablecoins, and spot-based ETFs. These variables will impact the market trend and the price of cryptocurrencies until June.

Using Stablecoins to Channel Liquidity

Although the market cap of stablecoins has increased compared to Bitcoin’s cap, it is still relatively close to previous ATHs.According to market expert Ki Young Ju, these ATH levels and the stablecoin exchange reserves ratio are comparable.

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This suggests that stablecoins have already been utilised for buy-side liquidity and that additional stablecoin inflows may be necessary to initiate another significant upswing in the event of subsequent strong price moves.

Meanwhile, the Coinbase premium has been negative for the past week. This is due to both the general mood of the market and the lack of significant fiat inflows that may support an increase in the price of Bitcoin. This pattern demonstrates how challenging it is to maintain the growth trajectory without new fiat capital infusions.

Watch ETFs and the State of the Bitcoin Market

The net average performance of spot ETFs has been negative over the last two weeks. Given that Bitcoin may eliminate some of the political risks related to the year’s events, many predict that these ETFs may see a comeback. Nevertheless, Bitcoin experienced a sharp decline of 6.26% in a single day—the most significant decline in nearly a century.

Because of this, market experts are now questioning if it is possible to take advantage of the current buying chances, given how Bitcoin has performed in the past following comparable drops.

Some point out that Bitcoin’s Relative Strength Index (RSI) is in an oversold zone, suggesting a potential price comeback. For the last two years, it has been shown that the RSI has been at comparable levels before such a significant market surge.

Some, like Samson Mow, point out that mood and anxiety, not significant sell-offs by large holders, are more responsible for the present market swings. Mow said,

“Everyone selling Bitcoin now will regret it within a year. I’m talking ‘biggest mistake of my life’ level regret. Deathbed lamentation level regret.”

Political Impact and Forecasts

Political developments are also expected to impact Bitcoin’s price in the future. Concerns about the future US presidential election are present in the market. Former US President Donald Trump has expressed support for Bitcoin mining and made it plain that he would accept cryptocurrencies as payment for political services.

Trump’s position runs counter to the policies of the present government. President Joe Biden’s re-election campaign has shifted from his administration’s previously unfavourable position on cryptocurrencies to contacting businesses for advice on digital asset regulations.

According to CryptoQuant, the Exchange Flow Multiple for Bitcoin has dropped to a noticeably low value of less than 0.6, indicating that there is little speculative demand in the market. This level was previously reached at $30K, after which it was usually observed that the rise would continue.

Besides the negative Coinbase premium, miners and long-term holders will likely sell. This pressure causes the market’s negative trend, the disparity in traders’ entry-level pricing and the lack of fresh money in custodian wallets and ETFs. Additionally, other market participants noted that Ethereum is in greater demand than Bitcoin, which could indicate the start of the altcoin craze.

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