Bitcoin (BTC) price fell to the lowest level since March due to liquidity issues

Bitcoin traded at its lowest level since mid-March on Friday as volatility, driven by a drop in liquidity, continued to batter cryptocurrency markets.

Bitcoin was trading at $26,312.23 around 5:09 a.m. ET, after falling below $27,000 on Thursday, according to CoinDesk data. This is the lowest level since March 17th.

Ether, the second-largest digital currency by market capitalization, also fell on Friday.

There are a number of issues facing the cryptocurrency markets right now, including low liquidity, industry crackdown from US regulators and macroeconomic concerns.

Bitcoin is up around 59% this year but prices have remained volatile, with low liquidity exacerbating moves up and down.

Clara Medaly, director of research at Kaiko, said there has been a “noticeable decrease in market depth” for bitcoin.

Market depth refers to the market’s ability to accommodate relatively large buy and sell orders. When the market depth is low, relatively small orders can cause the price of an asset to move up or down in a significant way.

And the liquidity situation could get even worse after that Bloomberg reported Jane Street and Jump Crypto, two of the largest cryptocurrency market makers, will back down from cryptocurrency trading in the US as regulators in the country continue their crackdown on the nascent industry.

“While it is not yet clear what was the catalyst for today’s sharp decline, volatility is to be expected given the current state of liquidity, especially after larger market maker Jane Street and Jump Crypto revealed that they are in the process of ending their cryptocurrency exposure,” Medaly said.

Liquidity has been a huge issue for the cryptocurrency markets since the closure of Silvergate and Signature Bank – two major platforms where people used to buy in the cryptocurrency market.

Scrutiny from US regulators has mounted on the cryptocurrency industry since the collapse of cryptocurrency exchange FTX last year.

The US cryptocurrency exchange Coinbase was warned by the US Securities and Exchange Commission in March of possible violations of securities law. Coinbase CEO Brian Armstrong said the company is preparing for a years-long court battle with the Securities and Exchange Commission.

Meanwhile, the Commodity Futures and Trading Commission alleged in March that cryptocurrency exchange Binance violated trading rules.

The cryptocurrency industry is locked in a battle with US regulators, accusing the Securities and Exchange Commission and the US government of not setting clear rules.

Meanwhile, the bitcoin network itself has faced congestion in recent days with Binance being forced last week to pause bitcoin withdrawals. Bitcoin transaction fees have increased this week, and while they have been dropping, they are still at high levels. The original Bitcoin network was not designed to handle high volume transactions.

“Bitcoin’s attempts to breach $30,000 have fallen amid a triple whammy of blockchain congestion issues, liquidity constraints resulting from downsizing by prominent market makers Jane Street and Jump Crypto, and ever-moving regulators,” Anthony Trenchev, co-founder of Nexo, told CNBC via email. Friday.

— CNBC’s Tanaya Machel contributed to this report.