In a surprising turn of events, Bitcoin has experienced a significant surge of 12% this month, despite the lack of widespread trading engagement.
The largest digital currency in the world has seen a remarkable rise since the beginning of June, with its price surpassing $30,000 on Wednesday, reaching its highest level since April 14, according to data from Coin Metrics.
While some market participants attribute this surge to the recent news of BlackRock, a prominent asset management firm, filing for a spot bitcoin exchange-traded fund tied to the market price of the underlying asset. There is another factor at play that goes beyond the influence of institutional adoption and the digital asset landscape.
The phenomenon can be attributed to the combination of low liquidity and the involvement of major players in the crypto market. Market depth, which represents a market’s ability to handle substantial buy and sell orders, has remained at historically low levels throughout this year. Consequently, when significant players enter the market with buy or sell orders, even if not exceptionally large, it has the potential to trigger significant price movements in either direction.
Market depth serves as an essential measure of liquidity within the market.
According to data provided by Kaiko, a renowned data firm, bitcoin’s market depth has declined by 20% since the beginning of this year. This decline in market depth has particularly impacted Bitcoin, making it one of the most severely affected cryptocurrencies in terms of liquidity, as noted by Kaiko.
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