Cryptocurrency Market Volatility Intensifies Amidst Liquidity Withdrawal

The cryptocurrency market is currently experiencing a period of high volatility due to a significant decrease in liquidity. According to recent data, the US Treasury bid-ask spread has widened by about 27%, indicating that market makers are withdrawing from the market and counterparties are decreasing.

This shift towards 'passive matching' makes prices more susceptible to being driven by liquidations rather than active trading. In an environment with low liquidity, key economic data releases such as China's PMI, US ISM, ADP, and nonfarm payrolls may amplify volatility rather than providing clear direction.

Looking at the largest cryptocurrency, Bitcoin (BTC), the previous concentration of liquidity at 67,500 and 65,100 has been cleared, indicating a round of long and short deleveraging. The current price has returned to around 67.5K, which could be a new battleground for liquidity.

As long as the price can hold stably above this area, it suggests effective support from below, potentially shifting the focus towards the 70K range as a target for liquidations. However, until overall liquidity recovers, price movement will remain mainly driven by liquidations.