Bitcoin [BTC] near 15% selloff earlier in the week occurred as leveraged long positions were quickly liquidated. Since then, the market appears to possess stabilized, suggesting “the worst of liquidations are behind us,” analysts for the leading United States bank JPMorgan outlined earlier on Wednesday.
“A recovery within the hash rate and signs of more efficient arbitrage trading suggest liquidity should still improve from here.”
“Going forward, bitcoin liquidity should remain robust and resilient; depth on renowned cryptocurrency exchanges has continued to drop less and recover faster than other asset classes.”
The report also mentioned the unique value of 24/7 access to consistent and stable liquidity pools in crypto markets, which could indeed encourage overall stability.
The sell-off was “likely exacerbated by the prevalence of high-frequency market-making, that we estimate makes up ~80% of on-screen liquidity on renowned cryptocurrency exchanges and is susceptible to runs when threatened by a spike in volatility.”
“Though it’ll take a couple of days to play out, history suggests liquidity should recover quickly.”
The contents of the JPMorgan report were reported earlier by Bloomberg News.