Bitcoin slumps on low liquidity and regulatory pressure

Bitcoin fell below $26,200 on Friday as the market continued to react to falling risky asset prices. The flagship cryptocurrency lost a tenth of its value this week, trading at two-week lows.

Currently, liquidity appears to be “very thin,” even for large crypto assets like Bitcoin. Market indicators cannot pinpoint a direct reason for the weakness, but concerns that reduced participation by institutional market makers could lead to more price volatility have pushed mid-to-larger bids to stomp the market, making it fall.

Recently, liquidity or market depth has deteriorated on major exchanges, including Binance, making it difficult for traders to fill large orders without impacting prices.

Experts believe Bitcoin’s drop to two-month lows has confirmed a bearish head-and-shoulders reversal pattern on technical charts. This breakdown opens every door for further declines toward the support near $25,000.

Backstory

After a failed breakout in early April, the price is firming below the $30,000 resistance level. The downward pressure over the past few days has also pushed the 50-day moving average to break near $28,000.

The $25,000 support area could be the next target, followed by the next important 200-day moving average near $22,000. Both are significant, and a drop below these levels would be disastrous for uptrend buyers.

On the other hand, a further breakout above the 50-day moving average will likely thwart the downside scenario, which, in turn, will likely push the price above $30,000.

At the regulatory level, the Securities and Exchange Commission (SEC) has targeted prominent Bitcoin mining firm Marathon Digital for alleged violations of securities laws that further added pressure on the cryptocurrency market.

Bitcoin mining firm Marathon Digital Holdings has announced that it has been subpoenaed by the SEC for alleged securities law violations as part of an ongoing investigation into a data center in Montana.

Marathon Digital, the second-largest listed Bitcoin miner in the United States, has been subpoenaed by the SEC to produce documents and information related to its operations. Marathon has announced its intention to cooperate fully with the SEC’s investigation.

But of all the crypto assets, Bitcoin is the most decentralized and resilient given what happened when China completely banned cryptocurrency trading. The mining business was just offshored, and now China’s bitcoin mining has resumed, producing the second-highest hash power in the world.

What you should know and expect in the nearest future

The banking crisis won’t go away anytime soon, and it could get worse. The US economy could face a major collapse later this year and into 2024, and the war between Russia and Ukraine is still raging.