According to analysts at JPMorgan, Bitcoin's declining market liquidity - how much is available for transactions - increases the risk of price fluctuations itsuvages.

"Market liquidity is currently much lower for bitcoin than for gold or the S&P 500, implying that even small flows can have a significant impact on prices ", the declining bitcoin market liquidity - how much is available for transactions - makes it prone to sharp price swings, JPMorgan's Nikolaos Panigirtzoglou wrote in a note Friday, as indicated by Bloomberg.

As long as bitcoin has grown by more than 300% since October, the number of coins held in exchange addresses fell 6.6% to 2.38 million, according to data from Glassnode. This shortage of liquidity on the sell side has been exacerbated by strong institutional demandlle, which allowed the sharp rise in prices towards record over $ 58,000 Sunday.

Low liquidity is also evident from average daily volume Bitcoin's spot and futures market of $ 10 billion, or just 10% of the $ 100 billion in gold, according to Panigirtzoglou. Therefore, relatively few large buy or sell orders could lead to significant price movements in both directions.

Read also: Bitcoin hits $ 58,000 for the first time; YTD gain greater than 98%

The three-month realized volatility of Bitcoin, its actual fluctuation levelprices over the past 90 days, stood at 92% on Sunday, the highest since June 9, 2020, according to Skew. Meanwhile, the three-month implied volatility, or investors' expectations for price movements over the next 90 days, was 94%.

At time of going to press, bitcoin is trading near $ 54,070, down 5.7% over 24 hours, according to 20 data.