Prices are rising steadily, but trading volume is shrinking—Bitcoin liquidity crisis emerges

Bitcoin has increased by 7.57% over the past week, with the current price breaking through $93,000, showing a strong momentum. However, behind the data lies a contradictory phenomenon: spot trading volume has fallen to its lowest level since November 2023. Prices are rising, but participation is declining. What does this indicate?

Contradictory Price Trends

According to the latest news, Bitcoin and altcoin spot trading volumes have dropped to their lowest levels since November 2023, despite continuous price increases. This is not a coincidence but reflects a change in market structure.

This contrast suggests that the price rise is not driven by trading volume but is being pushed up amid decreasing participation. In markets with poor liquidity, small trades can cause significant price fluctuations.

Roots of Liquidity Fragility

Tracing back to October 2025, the market experienced a $19 billion forced liquidation event. After this event, market depth has not fully recovered, and liquidity has remained fragile.

Why hasn’t liquidity recovered?

• Decreased retail participation, shrinking trading volume
• Increased risk awareness among market participants
• Institutional investors entering mainly through ETFs and other standardized instruments, rather than spot trading
• Relative decline in the attractiveness of spot markets on exchanges

Data Comparison

According to relevant information, the total trading volume of US spot crypto ETFs has exceeded $2 trillion, indicating continuous inflow of institutional funds. Meanwhile, spot trading volume is declining, showing a divergence in fund flows—institutions prefer ETF participation, while retail participation diminishes.

Potential Risks

Liquidity fragility brings two direct consequences:

Increased Price Volatility

In markets with thin trading volume, a large buy or sell order can cause significant price swings. This makes Bitcoin more susceptible to being moved or reversed by small trades, masking the true market demand.

Higher Downside Risk

When market sentiment turns, in an environment of insufficient liquidity, selling pressure can become more intense. Data shows that if Bitcoin drops below $90,000, the liquidation of long positions on major exchanges could reach $364 million. Conversely, breaking above $93,000 could see short positions liquidated up to $528 million. This indicates that both bullish and bearish forces are fragile and easily subject to reverse liquidations.

Market Sentiment vs. Reality

Interestingly, the market’s forecast for Bitcoin to reach $100,000 in January has risen to a 38% probability, with a 69% chance of reaching $95,000. This optimism starkly contrasts with the declining spot trading volume. Such bullish sentiment may be driven more by macro liquidity expectations (global debt expansion, easing liquidity) and institutional capital rather than genuine spot market participation.

Summary

Bitcoin’s current rally appears to be a “weak rally”—prices are rising, but market participation is declining, and liquidity remains fragile. This situation is unstable and unhealthy. On one hand, institutional inflows support the price; on the other, decreasing retail participation and drying liquidity imply a lack of genuine, broad-based demand.

In the short term, the market may continue to be driven by optimism, but in a fragile liquidity environment, any risk event could trigger a rapid reversal. Investors should remain cautious of the underlying fragility behind this surface prosperity.