A small bitcoin sell order placed on Binance failed to garner favorable bids from buyers, leading to an unexpected price drop of circa $100.
First noted by Hsaka, a prominent crypto analyst, trader(s) opened a 300 BTC sell order on the Malta crypto exchange at around 11:05 UTC. But the position didn’t close at the Ask rate. It put the seller(s) under risk of closing the order at a lesser price.
The trader ended up matching a dwarfed bidding rate to attract potential buyers, leading to a price drop of about $100 at the time of execution. The move appeared too unusual to onlookers, including Hsaka, who blamed Binance’s illiquidity for the cryptocurrency’s decline.
Checked again, and it's 300.
But yeah, nance liquidity seems to be dwindling away recently.
— Hsaka (@HsakaTrades) March 2, 2020
Liquidity and Its Impact on Bitcoin Prices
Liquidity attributes to the ease at which traders can buy or sell bitcoin (or any asset) at desired rates. The higher the ease, the better is the liquidity. That said, traders can enter and exit positions smoothly because there is always somebody available at the other end to match their orders.
But that is not the case with Bitcoin. The cryptocurrency remains an asset with low liquidity issues, according to the bid/ask data compiled by Bitcoinity, a crypto exchange data tracker. The portal shows that the difference between the bid and ask prices of bitcoin on a crypto exchange went as high as 2.271 percent in the last seven days.
Coupling the liquidity issues with bitcoin’s increasing volatility over the long-term presents the cryptocurrency as an immature asset. On the other hand, improving the bid/ask spread on all the exchanges can lead to growth. Unfortunately, that was not the case today with Binance.
https://twitter.com/apersiantrader/status/1234436706457141249
Dip Absorbed
Bitcoin’s $100 dip took it down by 1.21 percent. But the market quickly absorbed the loss, leading to a strong upside retracement above $8,800 post the European noon session.
The dump-and-pump somewhat showed traders’ inclination to defend support near $8,600. Their buying sentiment surged around the said level, hinting that an extended upside target sits near or above the $9,000 level.
Most importantly, the dip helped push the price above a crucial resistance level defined by bitcoin’s 200-day moving average (blued wave in the chart above). Prominent market analyst Scott Melker called it a “healthy retrace.”
Absorbed splendidly.
Adding bids for the next dumper. Dump 200 $BTC it to my lungs please.
— hah (@akaryakar) March 2, 2020
All and all, the bitcoin market continues to move forward but under the risk of low liquidity on Binance.