Bitcoin Drops Below $27,000 as Market Liquidity Concerns Climb - BLOOMBERG
(Bloomberg) -- Bitcoin whipsawed traders, with the largest cryptocurrency briefly falling below $27,000 for the first time in more than two weeks, amid concern declining participation from institutional market makers will spur more volatile price swings.
The digital currency tumbled about 5% in a matter of minutes in early afternoon trading in New York, erasing an earlier gain. It was down less than 1% to $27,460, after the momentary breach of the lower end of the roughly $30,000 to $27,000 range that it has been in trading in for the past month.
While trading surged during the crypto market’s first-quarter price rebound, a closer examination shows that volume is the lowest in several years after a series of industry scandals, bankruptcies and tightening regulation. That has led to a pull back in activity from Jane Street Group and Jump Crypto, two of the world’s top market-making firms.
“We are currently in a really low liquidity environment. And in large part it’s been caused by the withdrawals of market makers from the market, because the regulatory picture in the US has gotten so hazy,” said Henry Elder, head of decentralized finance, Wave Digital Assets.
Jane Street is going even further by scaling back its crypto ambitions globally because regulatory uncertainty has made it difficult for the firm to operate the business in a way that meets internal standards, Bloomberg reported Tuesday, citing a person familiar with the matter.
Wednesday’s drop was likely augmented by speculation that the US government is transferring large quantities of Bitcoin, according to Kyle Doane, a trader at Arca. That caused some traders to worry that the Bitcoin would be dumped onto the market while demand is shallow.