Yahoo Finance Bitcoin retakes $27,000 but investors eye low liquidity in crypto trading
Bitcoin (BTC-USD) has retaken the $27,000 (£21,547) mark amid investor concerns over the debt ceiling debate in the US and liquidity issues within the cryptocurrency market.
Bitcoin was trading at $27,350 on Tuesday, according to data from Coingecko.
After dipping below $26,000 on Friday, bitcoin had hovered below the $27,000 mark until late on Sunday.
Read more: Crypto live prices
Edward Moya, senior market analyst at foreign exchange market maker Oanda, said the imminent debt ceiling discussions in the US could reveal whether investors perceive bitcoin as a safe haven, or not.
“Bitcoin seems poised to stay in a range, but if risk aversion triggers a de-risking moment, we could see selling pressure extend below last week’s low,” Moya wrote in a note.
President Joe Biden is planning to discuss the debt ceiling with congressional leaders at the White House on Tuesday, amid an escalation of warnings the US Treasury could run out of cash to keep paying the nation's bills as soon as 1 June.
Liquidity issues in the crypto market
Crypto investors have been assessing dwindling liquidity in cryptocurrency markets, triggered by market makers such as Jane Street and Jump Crypto pulling back from US crypto trading last week amid increasing US regulatory scrutiny.
A report released by crypto data firm Kaiko on Monday revealed a 4% drop in bitcoin’s 1% market depth, an indicator of liquidity conditions, over the past month, while ether (ETH-USD) experienced a 2% slide. The report found that the liquidity of altcoins took a harsher hit, plummeting approximately 17% on a monthly basis.
Read more: Bitcoin shows bullish signals after Janet Yellen warns US could be 'out of cash by early June'
Liquidity in markets refers to the ease with which an asset or security can be bought or sold without causing a significant change in its price.
Data from CryptoQuant showed that reserves of bitcoin across all cryptocurrency exchanges fell on Monday, suggesting investors are removing more of the digital asset from exchanges, lowering the liquid supply, indicating a possible increase in short term value.
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