Expect More Bitcoin (BTC) Price Volatility In April As Liquidity Worsens

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Last month, Bitcoin and the broader crypto market showed strong resilience against the banking crisis and continued their upward journey. Bitcoin ended Q1 2023 with almost 70% price gains.

However, Bitcoin will likely show more price volatility in April as liquidity dries up significantly. Blockchain analytics firm Kaiko stated that investors are likely to pay more on trades due to slippages or due to the difference between the expected price and the trade execution price. This difficulty in trading resembles clear signs of worsening liquidity and chances of volatile price swings ahead this month.

Undoubtedly, Bitcoin has been the best-performing asset so far this year in 2023. However, the overhangs of growing US regulatory action and the shutdown of a few crypto-friendly banks continue to put pressure on the market. Conor Ryder from Kaiko told Bloomberg:

“It’s more indicative of the institutional reluctancy to offer liquidity in the space. A lot of crypto firms don’t want to get caught in the middle of a battle between US regulators and exchanges.”

Although the BTC price recovered strongly in early 2023, the trading volumes and liquidity have dried up significantly. Amid multiple scams last year, retail investors still remain on the edge with greater participation in the market. Mark Connors, head of research at digital asset management firm 3iQ told Bloomberg:

“The tourists are definitely gone. If you’re in this, you have to understand that the volatility is there, you don’t know where it goes day-to-day, but you understand the trajectory, the adoption, etc.”

Bitcoin Spot Trading Volumes

Let’s take a look at the spot trading volumes for BTC over the top two exchanges – Binance and Coinbase. By the end of March, the largest trading platform Binance saw spot trading volumes of over $6 billion with monthly visits of 65 million users.

Similarly, Coinbase saw trading volumes of about $1.3 billion and 33 million monthly visits roughly. These two exchanges have come under the fire of US regulators over the last two weeks.  Fiona Cincotta, senior financial markets analyst at City Index said:

Bitcoin trading volumes have collapsed, “which inevitably makes for a more volatile market. The sharp drop in volumes means that it’s easier for large orders to move the BTC prices. So sit tight, there could be more wild swings coming. Falling volumes points to waning appetite for Bitcoin at its recent higher levels”.

On the other hand, there a large number of Bitcoins moving off-exchange recently. As per on-chain data provider CryptoQuant, nearly 46,000 BTC have left the exchange over the last 10 days.

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Bhushan Akolkar