Bitcoin had a 15% sell-off at the beginning of the week, and it happened when long positions in a leveraged position were liquidated. However, since this, the market seems to have regained stability, which JP Morgan Chase & Co. suggests means that the ‘worst of the liquidations are behind us’.
Analysts wrote, “a recovery in the hashrate and signs of more efficient arbitrage trading suggest liquidity should continue to improve from here. Going forward, Bitcoin liquidity should remain robust and resilient; depth on major exchanges has continued to drop less and recover faster than other asset classes.”
The data also talked about the special value of around the clock access to stable and consistent liquidity pools in current token markets, which would result in generalised stability.
The sell-off was “likely exacerbated by the prevalence of high-frequency market making, which we estimate makes up 80% of on-screen liquidity on major cryptocurrency exchanges and is prone to runs when threatened by a spike in volatility. Though it will take a few days to play out, history suggests liquidity should recover quickly.”