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After the most recent Bitcoin halving, market analysts are paying attention to the crucial role of liquidity in defining the direction of cryptocurrency in the coming months. According to Kaiko’s analysis, the improvement in liquidity could support a continued increase in the price of Bitcoin.

Liquidity refers to the ease of buying or selling an asset without causing a significant impact on its price. Recent data indicates that BTC liquidity has been showing steady improvements since the lows recorded after the FTX collapse, especially after the approval of Bitcoin spot ETFs.

According to Kaiko, the improvement in liquidity is a positive development for Bitcoin. This is because it can reduce price volatility and minimize the impact of large sales. Solid liquidity is essential to sustain a prolonged positive trend in Bitcoin price and increase market confidence and demand.

Since the halving on April 20, Bitcoin’s aggregate market depth has shown promising growth. The metric increased from $323.91 million on April 14th to $419.97 million by April 22nd.

Futuro do Bitcoin

However, despite the overall positive trend in liquidity, there are concerns regarding weekend trading activity. Historically, weekend liquidity management has been challenging for cryptocurrency markets. This results in a consistent drop in trading volumes over the last three years.

While the halving did not immediately impact weekend trading volumes, with daily numbers hovering around $10 billion on the first day after the event, a reduction in this metric could diminish the positive effects of increased liquidity.

Despite optimism surrounding Bitcoin spot ETF approvals, improved liquidity conditions and higher transaction fees, macroeconomic uncertainties persist, raising doubts about the post-halving trajectory.

Previous Bitcoin halvings have coincided with periods of low interest rates and stable inflation. And this drove subsequent price increases.

Kaiko notes that between 2009 and 2016, for example, the US Federal Reserve held rates at around 0.25%, briefly raising them to 2.5% in 2019 before returning to 0.25% for the third halving in 2020.

Low rates encourage investment in risky assets like Bitcoin. While BTC is sometimes seen as a safe haven, it often benefits from lower fees due to its correlation with risky assets.

“In the future, the halving alone will not be enough to drive a sustained rally. The asset will need to attract new investors, possibly through institutional products, to maintain an upward trend. Therefore, improving liquidity and demand will be crucial to Bitcoin’s value proposition in the coming months,” the company states.

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