Bitcoin Rally May Slow as Order-Book Imbalance Hints at Profit Taking

• The gap between liquidity on the ask and bid side within 2% of the market price has widened to nearly $100 million, according to data tracked by Kaiko.
• The persistent gap likely stems from investors taking profit at record-high prices and market makers' positioning.

Bitcoin's BTC$111,102.02 price rally may face temporary resistance as the climb to a record high seems to have spurred profit-taking among holders of the largest cryptocurrency by market cap.

That's the message from the imbalance between potential sellers and buyers in bitcoin's aggregated order book across 33 centralized exchanges. The gap between the total dollar value of orders to sell bitcoin, the so-called ask side, and orders to buy, the bid side, within 2% of the market price has widened to nearly $100 million, according to Paris-based Kaiko. That's about five times its usual value.

Moreover, there has been relatively more liquidity on the ask side, representing potential supply to the market, since late January, a sign investors have been looking to sell on the rise. Bitcoin has surged almost 60% since the start of the year.

"The current mismatch is notable because the 2% BTC ask depth has surpassed the bid depth for the longest period since early 2021 (when our data starts). It typically suggests building of limit orders on the sell side of the order book and could mean that traders are taking profit as BTC nears its all-time high," Dessislava Aubert, a research analyst at Kaiko, said in an email.

Bitcoin tapped fresh record highs above $69,000 on Tuesday before sliding back and then rebounding. It was recently changing hands at $66,700, little changed on a 24-hour basis. The CoinDesk 20 Index, a broader market gauge, was down 1.5% at 2,553.

Market makers could be partly responsible for the imbalance in order book numbers, Aubert said. Market makers agree to provide liquidity to the order book and are always on the opposite side of investors' trades. They are constantly hedging their exposure to maintain a direction-neutral portfolio.

"We also observe a strong increase in demand and net buying on most exchanges over the past days, so it [the imbalance] could be related to market makers positioning," Aubert said.

The chart below shows the cumulative volume delta (CVD) on major spot exchanges since Feb. 25. A positive and rising CVD indicates a net buying pressure, while a negative CVD suggests the opposite. CVD on Binance, the largest crypto exchange by volume traded, has grown by nearly $1 billion since that date. Other exchanges have also contributed to the net buying pressure in the market.