Bitcoin Liquidity 'Likely to Remain Resilient' After Volatility Shock, JPMorgan Says

JPMorgan expects bitcoin liquidity should recover, though it may take a few days as market conditions stabilize.

Apr 21, 2021 at 7:43 p.m. UTC
Updated Sep 14, 2021 at 12:44 p.m. UTC

Bitcoin’s (BTC) 15% sell-off earlier this week occurred as leveraged long positions were quickly liquidated, but since then, the market appears to have stabilized, suggesting “the worst of liquidations are behind us,” JPMorgan Chase & Co. analysts wrote on Wednesday.  

  • “A recovery in the hashrate and signs of more efficient arbitrage trading suggests liquidity should continue to improve from here,” the analysts wrote in a report.
  • “Going forward, bitcoin liquidity should remain robust and resilient; depth on major 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 cryptocurrency markets, which could encourage overall stability.
  • The sell-off was “likely exacerbated by the prevalence of high-frequency market making, which we estimate makes up ~80% of on-screen liquidity on major cryptocurrency exchanges and is prone to runs when threatened by a spike in volatility.”
  • “Though it will take a few days to play out, history suggests liquidity should recover quickly.”

The contents of the JPMorgan report were reported earlier by Bloomberg News.


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