Analysts from JPMorgan (NYSE:JPM) have argued that Bitcoin’s rising illiquidity could be bad for the digital asset. Their statement comes amid Bitcoin’s sharp drop to below $50,000 after hitting a new all-time high of $58,000 over the weekend.
Although the consensus is that scarcity could drive prices higher, Nikolaos Panigirtzoglou, an analyst with the American banking giant has warned that rising illiquidity could propel sharp negative prices. He wrote:
[The] market liquidity is currently much lower for Bitcoin than in gold or the S&P 500, which implies that even small flows or inflows could have a significant price impact.
Panigirtzoglou did not specify whether his predictions would affect the long-term price of Bitcoin.
BlackRock’s CEO Larry Fink had earlier shared similar sentiments when he said that Bitcoin needed to prove itself as a store of wealth. Although the CEO of the world’s largest asset manager did not express concerns about Bitcoin liquidity, he was more worried about volatile prices caused by “small-dollar investments.”