As of Thursday 11th of May 2023, the crypto market saw a rapid fall in its value where the price of this cryptocurrency fell below the $27,000 mark.
Investors mulled the news reports regarding the two major liquidity providers rolling back their operations for crypto trading in the U.S. According to Coin Metrics, Bitcoin saw a drop of around 3% in its value and reached $26,937.29.
The case was no different for Ether which also lost around 3% of its value and reached the value of around $1,793.82. If the pace of their downward trajectory continues the same way, then they’re likely to go down by more than 8% and 9% respectively.
Jane Street and Jump Crypto Take a Step Back
According to the reports by Bloomberg, Jane Street, and Jump Crypto decided to roll back their operations for crypto trading in the U.S. The decision was in light of the country’s regulators continuing to crack down on this new and highly volatile market.
Both companies are the two biggest market makers and their decision led to a huge impact on the investor sentiment. It was one of the primary reasons why the price of Bitcoin and Ether saw a significant drop.
Jane Street didn’t comment anything regarding to their decision, while Jump didn’t responds to the CNBC’s “Crypto World” request.
According to David Wells, CEO of Enclave Markets, there will be various large swings in the market in both directions as various large market makers have cut down their providing by a significant margin.
He further added how larger market makers play a major role in creating more stability in prices since they can provide with more liquidity. Additionally, he also commented how the order books are thinner generally and it could lead to more frequent gaps up and down.
Growing Regulatory Crackdown by the Authorities
The Federal Deposit Insurance Corporation, the Federal Reserve, and the Office of the Comptroller of the Currency released a joint statement in late February which warned banks about the liquidity risks that comes with banking crypto firms.
After the bankruptcy of Silvergate and Signature Bank, that ran the two primary fiat onramps into the cryptocurrency market, the increased illiquidity in the market took on greater significance.
While Bitcoin did touch the $30,000 market a month earlier for the first time since June 2022, it is still struggling to go beyond that mark for quite some time. It is continuously floating in the range of $30,000 to $26,000 ever since then.
Analysts and experts are watching $25,200 as the primary threshold before thinking about a worrisome situation where the price would see a meaningful drop.
The Crypto Crash in 2022
The crypto industry had a market capitalization of an all-time high of around $3 trillion in 2021. There were various factors that led to this growth such as the rise of NFTs, the bandwagon of Meta, and much more.
Top-notch coins like Bitcoin reached an all-time high value of around $64,000 to $65,000. However, that was only short-lived since the market continued to experience a downward trend throughout 2022. The Russia-Ukraine war was primarily the reason behind this downfall as investors flocked to safe-haven assets.
They abandoned crypto coins, leading to a significant fall in the value of Bitcoin and virtually wiping off various small coins. It also wiped out around 2/3 of investors’ wealth as the market capitalization had fallen down to $900 billion by 2022.
Ever since then, it hasn’t been able to go beyond the $30,000 mark. The growing regulatory pressure on cryptocurrencies globally is also a major hurdle for the industry that will also lead to a huge impact.