The most recent Bitcoin rally could face a liquidity shock, according to analysts at world’s top bank JPMorgan Chase & Co.
According to a Feb. 22 Bloomberg report, JPMorgan analyst Nikolaos Panigirtzoglou said that Bitcoin liquidity has deteriorated. As a consequence, a relatively-small sellout could have major implications for the coin’s price:
“Market liquidity is currently much lower for Bitcoin than in gold or the S&P 500, which implies that even small flows can have a large price impact.”
Panigirtzoglou explained that this allows for Bitcoin to make sudden movements in either direction depending on the market pressure. He pointed out that the coin’s trading volumes stand at about $10 billion daily for the spot and futures market combined, whereas gold sees a daily volume of $100 billion. This, he said, is consistent with “much lower liquidity in Bitcoin than in gold.”
Certainly Bitcoin has had a volatile day, dropping $9,000 this morning as it dipped into the $48,000 range before popping back up above $53,000—but still well short of the this weekend’s all-time high of $58,330 on CoinMarketCap. .
Over the last months, JPMorgan analysts have made numerous skeptical comments concerning Bitcoin and its bull run. As Modern Consensus reported in late November 2020, at the time—with Bitcoin at $18,000—JPMorgan Chase chief executive Jamie Dimon said that he expects the United States government to regulate it if it gets any bigger.
In early January, a JPMorgan analyst admitted that Bitcoin could reach $146,000 per coin, but not anytime soon. Later last month, JPMorgan advised clients to be wary of Bitcoin—saying that it is an unsuitable investment and hedge—right as world’s top asset manager BlackRock jumped in.
Earlier this month, Panigirtzoglou wrote that Bitcoin’s bull run “looks unsustainable” in a note, suggesting that an increased inflow of money from speculative investors destabilized its price. Just a few days ago—as Bitcoin’s market cap just broke $1 trillion—JPMorgan analysts called it an “economic sideshow” and the “poorest hedge” against a stock market downturn.