Bitcoin is struggling under liquidity pressure as market depth decreases

Bitcoin’s inability to recover $90,000 looks less like a narrative debate and more like a test of the market’s plumbing.

For most of 2025, the surface story was institutional momentum. The US is moving toward a workable regulatory perimeter, capped by President Donald Trump’s signing of the GENIUS Act to federalize stablecoins for payments.

At the same time, discover that Bitcoin ETFs normalized exposure within brokerage channels, and the broader crypto economy acted as if it had finally entered the mainstream of the asset class.

This resulted in a rally that pushed Bitcoin to a new all-time high of $126,223 in early October.

However, on October 10, the microstructure deteriorated as a violent breakout wiped out approximately $20 billion in leveraged positions on crypto platforms. This forced BTC’s price to drop 30% from its 2025 highs, and the asset recorded its first Red October in several years.

Since then, the Bitcoin market has fallen thanks to reduced liquidity, lower trading volumes and larger holders selling on the upswing.

This dynamic largely explains why Bitcoin is currently struggling below $90,000, instead of viewing that level as a staging post for new highs.

The hangover of October 10

The liquidation event was important because it fundamentally changed the marginal liquidity provider’s risk appetite.

In a deep market, volatility is painful but tradable. Market makers indicate a size around the mid-price, arbitrage agencies keep the locations in line and large flows are kept clear without forcing price differences.

After October 10, the incentives changed. Dealers tightened risk limits and the market began trading with significantly reduced shock absorption.

This brittleness is clearly visible in the behavior of larger holders. CryptoSlate previously reported how BTC whales have continued to offload the major cryptocurrency, dampening market momentum even after the leverage purge.

Moreover, the market shift is also clearly visible in data on Bitcoin volumes and depth.

CoinDesk Data’s November exchange assessment shows that centralized exchange activity has retreated to its lowest level since June.

Combined spot and derivatives volumes on the centralized exchanges fell 24.7% month over month to $7.74 trillion, the sharpest monthly decline since April 2024, according to the company.

Spot volumes fell 21.1% to $2.13 trillion, while derivatives volumes fell 26.0% to $5.61 trillion. It is striking that the market share in derivatives fell to 72.5%, the lowest level since February 2025.

A market can print high prices with low turnover, but the dynamics immediately change when participants have to change size.

The depth has fallen

The clearest warning sign for Bitcoin is its current market depth, which measures visible buying and selling interest around its mid-price.

This is where the ‘trillion dollar illusion’ becomes tangible. Market capitalization is just a mark-to-market calculation; Liquidity is the ability to translate intent into execution without paying a hidden tax.

When order books are thick and spreads predictable, institutional strategies, on-target rebalancing and hedging without slippage shocks are feasible. Liquidity Compounds: Dense flow invites tighter quotes from market makers, reducing costs and attracting more participation.

However, the reverse is self-fulfilling. The limited liquidity drives up trading costs, forces participants to take a step back and ensures that the next shock leaves a deeper scar.

Facts from Kaiko shows that the total market depth of 2% for Bitcoin is down about 30% from its 2025 high. In practical terms, this is the difference between a market that can absorb a fund rebalance without drama and a market that shoots through levels when that same flow hits.

A snapshot of Binance, the largest crypto exchange by trading volume, illustrates this point.

According to Kaiko, market depths of both 0.1% and 1% for BTC pairs have risen significantly in recent years, eclipsing pre-2022 crash highs.

As of Bitcoin’s last all-time high in October 2025, the 1% market depth on Binance was over $600 million.

Since then, that depth has fallen to less than $400 million at the time of writing.

Binance is not a general indicator of global liquidity, but it does serve as a useful gauge of the health of its visible order book.

However, when the world’s premier trading center shows thinner books around the mid-price, it explains why rallies stall just as momentum traders encounter real selling.

ETF flows and the migration of off-exchange liquidity

The second structural shift concerns where liquidity now lives, especially as the ETF complex has matured.

Facts from SosoValue shows that investors have withdrawn more than $5 billion from US-listed spot Bitcoin ETFs since October 10.

With a deeper tape, a demand shock of that magnitude is gradually absorbed. In a thinner market, it creates a push-pull dynamic where prices remain stuck at round numbers as each rally hits a wall of redemptions, profit-taking and whale distribution.

Meanwhile, regulatory changes have further changed the way flows enter and exit the system. In July, the SEC voted to allow in-kind creations and redemptions for crypto ETP stocks, a move intended to bring these products on par with commodity ETPs.

Operationally, in-kind flexibility gives authorized participants (APs) more options for sourcing and supplying Bitcoin, including through internal inventory, OTC counterparties, and prime broker channels.

While this reduces friction under normal circumstances, it reinforces a broader trend: liquidity is increasingly internalized beyond visible stock market order books.

This migration explains the current paradox: Bitcoin remains a massive, institutional asset, yet feels mechanically fragile.

Private liquidity is not required to manifest during panic. When tension hits, spreads widen, size shrinks, and activity bounces back into the public space just when public depth is weakest.