[Bitcoin Now] Decline Amid Liquidity Drop... "Lowest Trading Volume Since August Last Year"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] As liquidity decreases, the price of the representative cryptocurrency Bitcoin is showing a downward trend.

According to the global cryptocurrency market tracking site CoinMarketCap, as of 9:42 AM on the 18th, the price of Bitcoin was $39,734 (approximately 48.97 million KRW), down 1.84% compared to the previous day.

Bitcoin prices are weakening as the average monthly moving trading volume on major cryptocurrency exchanges has reached its lowest level since August 2021. On the 17th (local time), Bloomberg News cited FRNT Financial and explained that "this occurred as the U.S. Federal Reserve (Fed) and other central banks accelerated their fight against inflation, which has remained hotter and longer than expected." Earlier, John Williams, President of the New York Federal Reserve Bank, described the possibility of a 0.5 percentage point rate hike in one go?a big step?as a "reasonable option." Following this, Bitcoin prices fell by more than 3%. Until May 2021, daily Bitcoin trading volume on these exchanges reached $2.57 billion (approximately 3.166 trillion KRW), but it has reportedly decreased by about 60% over the past month.

Noel Acheson, Head of Market Analysis at Genesis Global Trading, also stated, "Liquidity has decreased due to uncertainty," adding, "Investors are worried that the situation will worsen rather than improve." He further analyzed that the proportion of Bitcoin not traded over the past year is at an all-time high, with about 76% in a non-liquid state.

Steve Sosnick, Chief Strategist at Interactive Brokers, said, "Despite continued advertising, those who wanted to buy Bitcoin have already done so," and added, "Ultimately, Bitcoin is a risky asset and will exhibit such characteristics."

However, there are also claims that Bitcoin is more advantageous as an inflation hedge rather than a risky asset. Russell Starr, CEO of DeFi Technologies, argued, "Inflation could become worse than it is now," and "The U.S. economy could fall into a recession, which would stimulate the Fed to ease monetary policy again." He added, "Although it may show weakness in the short term, Bitcoin will test rises to $70,000, $80,000, and $100,000."

Meanwhile, the Digital Asset Fear & Greed Index by Dunamu, which operates the domestic cryptocurrency exchange Upbit, recorded 46.81 on the day, indicating a 'neutral' stage. This is a 0.31 increase compared to 46.50 (neutral) the previous day. Dunamu's Digital Asset Fear & Greed Index is divided into stages of 'Extreme Fear (0?20)', 'Fear (20?40)', 'Neutral (40?60)', 'Greed (60?80)', and 'Extreme Greed (80?100)'. The greed direction indicates increased interest in buying by market participants, whereas moving toward fear indicates a fear of asset decline, leading to market exits and a chain reaction of price drops.