Bitcoin price has been trading within a tight trading range over the past week, making a few sharp stop runs in the process to liquidate over-leveraged margin traders.
One prominent crypto trader says that the stop runs are due to the complete lack of liquidity near the current Bitcoin price, and that they will continue until Bitcoin breaks out to either $6900 or $7900 where greater liquidity is located.
Stop Runs to Continue Until Bitcoin Price Finds Liquidity At $6900 or $7900
This week, the cryptocurrency market was shaken out by a powerful spike upward from low $7,000 to as high as $7,800, before a sudden move in the opposite direction brought the price of the leading crypto asset by market cap right back to where it started, liquidating traders in both directions.
The move marked the return of the “Bart Simpson” Bitcoin price chart pattern – an unusual chart pattern that is due to low liquidity and low volume in crypto markets.
The “Bart Simpson” move liquidating traders in this price range, has wiped out any remaining liquidity in this price range, and according to one crypto trader, vicious stops runs like what has been witnessed in crypto markets this week will continue until Bitcoin price breaks out of the range and heads to either $6,900 or $7,900 where more liquidity lies.
There is almost no liquidity near the price right now.
It is at $6900 and $7900.
Other than that, it's thin air.
This is why the stop hunts are so bad. pic.twitter.com/iWvtslp7tP
— Jacob Canfield (@JacobCanfield) December 6, 2019
Lack of Liquidity Is Why Most Crypto Assets Are Worth Zero
Liquidity is closely tied to value. Assets with extremely low liquidity, despite possibly having a large value attached to them, like Bitcoin price does, are subject to extreme volatility and deviations in price as it takes very little capital to move the price of the asset.
It’s the lack of liquidity in crypto assets another analyst says is why as much as 99.99% of them are worth zero.
Friendly reminder that 99.99% of tokens in this space will, and most likely currently are due to liquidity, worth ZERO.
— Flood [BitMEX] (@ThinkingUSD) December 5, 2019
While that’s not entirely true, many of the assets the analyst is referring to do have a value, however, due to the lack of liquidity in the markets of these assets, any investors with a sizable holding of the asset would tank the price almost immediately should they attempt to cash it out all at once.
Market sell orders of such magnitude would wipe the meager buy orders out of any crypto exchange’s order books quickly, causing the price to fall lower and lower to find more liquidity to cash out into.
The lack of liquidity is also what allows whales to easily push the price of an asset in either direction at their will, using such methods. Even the fact major players can manipulate prices as they please diminishes the overall value crypto assets provide.
So while the next time you check your portfolio app and see the value of your favorite altcoin or crypto asset, think about what will happen to it if everyone starts to try to cash it out all at once