Bitcoin slides amid declining liquidity

On Friday, Bitcoin slides down $26,376 getting closer to reaching two-month lows as a result of worries that a “head-and-shoulders” pattern would favour the bears. Despite favourable macroeconomic conditions for risk assets, Bitcoin was unable to take advantage of the gains that may have been made amid declining liquidity.

Thus, on daily time frames, traders’ worries centred on whether the pair would continue to decline following three local peaks. Should this “head-and-shoulders pattern,” which is now plainly evident on the trading chart, confirm, a bad precedent would be set.

It is interesting to notice that the popularity of Bitcoin Ordinals, which allow the inclusion of text, graphics, and code on the lowest unit of a BTC, a satoshi, has decreased. Prior to entering a downward spiral, the volume of Ordinals trades peaked on May 8, and in the three days from May 8 to May 11, the number of transactions fell from 17,000 to 6,000.

Earlier in the day, the most valuable cryptocurrency by market value dropped to $26,160, its lowest level since March 17. Since May 6, prices have dropped by more than 12%, decoupling from the rise in conventional risk assets like Nasdaq.

On Thursday, the BTI indicator, which gauges the strength and directional momentum of the price of bitcoin, changed from bullish to neutral. With the exception of the brief red flash (downtrend signal) in the middle of March and the neutral reading on April 24, the indicator has continuously shown an uptrend since January 13.