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The current orderbook structure for Bitcoin presents a bleak picture, and traders are rightly calling it scary. The distribution of liquidity on the main exchanges following the recent market crash is wildly out of balance: buyers are pulling back, and sell walls are getting thinner, making Bitcoin extremely susceptible to another steep decline.
Liquidity concentration
An alarming concentration of liquidity below the current market price is revealed by the orderbook data that was provided, which was taken from CoinGlass. Bitcoin is currently trading at about $104,500, just above the 200-day moving average, or black line, which is the final significant technical support level. The liquidity heatmap, however, indicates that most participants anticipate a deeper retracement before reentering, as dense clusters of bids only form close to $100,000-$102,000.
Multiple forced selling events and liquidation cascades are indicated by the red circles and yellow bars on the liquidity map; several of these have already taken place in the last 24 hours. While the green flashes show isolated spot absorption, primarily from short-term buyers trying to defend important levels, each red spike denotes aggressive sell pressure. But those are weak defenses.
A liquidity void is indicated by the big red circle in the lower right corner. This is a risky void in resting orders that could hasten a decline in the event that the market experiences another selling wave. A short-term bearish shift has been confirmed technically, as Bitcoin has broken below the 50-day and 100-day EMAs. The RSI is close to 33, indicating that the market is oversold, but there is not any obvious bid depth to back a recovery.
More stress on BTC
Simply put, there is no longer a safety net underpinning the market. The most frightening aspect is not the cost per se, but rather the orderbook’s brittleness. The lack of liquidity in between could cause a sharp move toward $100,000, or even $98,000, if Bitcoin loses $104,000. The orderbook for Bitcoin is essentially expressing anxiety and stress. There is no significant cushion below, and the little buying interest that is present is much lower, suggesting that traders anticipate more suffering before any attempt at recovery can begin.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team