Despite the high sentiment of BTC investors, the risk of a liquidity crisis in the cryptocurrency sector still looms over everyone’s heads, resulting in a state of volatility and instability in the investment situation in the cryptocurrency market.
This year witnessed many events that strongly affected the industry market, but as the year drew to a close, experts conducted analyzes to find out the lessons learned, and to identify the trends that contribute to the upward price movement during the year 2023.
Credit crises as a result of the collapse of crypto exchanges
In the same context, the collapse of the FTX exchange, the Tera coin, and the Three Arrows Capital fund contributed to a credit crisis, a decrease in capital flows, and a threat to more centralized exchanges.
The crypto market has fallen in a shakeup unseen among the industry, but there are positive signs in some of the long-term data, some of which are small-sized portfolios accumulated during the period of low volatility.
Low liquidity and serious losses in BTC
The crypto market had witnessed an influx of liquidity during November of 2021, in the Bitcoin BTC currency, as the price reached the highest levels, and investors achieved about $ 455 billion in profits, and on the contrary, with the receding liquidity, traders try to deal with caution with the bear market, as the losses led With a value of $ 213 billion, investors gave up 46.8% of the profits of the emerging market, and this is similar to the losses achieved in 2018, when the rate of decline in profits reached 47.9%.
In this regard, Cumberland, the major liquidity provider in the crypto sector, has captured the challenges facing the industry market, stating that limited liquidity is the result of several compromises that have left bankrupt companies without coins to sell.
According to CoinShares analysis of the weekly flow of funds, trading volumes reached their lowest levels in two years at $677 million for the week, and the low trading volumes are associated with the flow of cryptocurrency funds from digital assets, which increases the obstacles to reaching the upside.
Looking at the history of the industry, centralized exchanges (CEX) have been a source of cash driving capital into the crypto space, but for fear of regulatory issues, getting new money has become difficult.
The previous data points to a bearish crypto market but also monitors the possibility of being in a new bull market.
Investor sentiment has improved in the crypto market
On the other hand, crypto firms are hoping to turn the winds after the bearish Fed meeting, and there are points on the chain that some minor improvements are emerging.
According to the CoinShares platform, despite the spread of fear within the central exchanges, and trading volumes, there is an improvement in internal flows.
BTC has seen inflows of $17 million improving investor sentiment since mid-November with inflows totaling $108 million.
These numbers do not come as expected, but the continued low volatility of BTC may provide investors with an opportunity to get an average cost in dollars, and wait for a reversal, and the current volatility has reached its lowest levels for BTC, as compared to the numbers it reached in October 2020.
The decrease in volatility is associated with a new rise in the group of providers of bitcoins at the long-term level. Despite the decline in the price of bitcoin, the circulating supply of the currency in the hands of traders still represents 72.3%.
Glassnode spotted the uptrend as a measure of the coin backlog that occurred in June and July of this year, following the deleveraging of Three Arrows Capital and the failure of lenders in the digital space.
BitMEX CEO, Arthur Hayes, suggests that Bitcoin has reached the bottom after some companies entered the bankruptcy stage as a result of their irresponsible policy in the crypto space.
Significant increases in investor sentiment were not clearly evident to reflect an upward trend in the encrypted currency that may be coming, but this did not prevent positive points that help the market rebound.
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