Liquidity in the bitcoin market should recover quickly after the futures-driven price crash, JPMorgan says
Liquidityin the bitcoinmarket should recovery quickly after the recent price falls, JPMorgansaid.
- The bank's analysts said activity in the spot and futures
marketsis growing more resilient.
- They said the recent price falls were worsened by the liquidation of futures contracts.
Liquidity in the
However, bitcoin picked up on Monday, rising roughly 4% to trade at around $52,600.Analysts said a number of factors seemed to have triggered the recent drop, including general fatigue and profit-taking after a rapid rally during Coinbase's listing on the stock market; a sharp drop in mining rates around the world; and a ban on cryptocurrency payments in Turkey.
JPMorgan's note said bitcoin derivatives, such as futures, were likely a key accelerant. Futures are contracts to buy, or sell, a particular asset at a specific price and at a specific time at a later date.
The analysts also said round-the-clock trading of bitcoin, which is very rare in financial markets, should support the market.
"A well-developed norm of access to 24/7 stable liquidity pools should benefit cryptocurrencies over time, as the market continues to deepen and mature," they wrote."Data suggest [the] worst of these liquidations is likely behind us, suggesting little overhang to work through.
"A recovery in [mining] and signs of more efficient arbitrage trading suggests liquidity should continue to improve from here."
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