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Bitcoin briefly falls below $26,000, posts worst week since November

Bitcoin is facing a number of headwinds including low liquidity which is contributing to volatility. U.S. regulators are also heavily scrutinizing the crypto industry.

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Bitcoin traded at its lowest level since mid-March on Friday as volatility, driven by low liquidity, continued to hit cryptocurrency markets.

Bitcoin ended the day lower by 2.58% at 26,181.46 after briefly hitting a low of 25,833.34 the lowest level since March 17, according to Coin Metrics. The biggest crypto asset by market cap posted a weekly loss of 11.25%, making it its worst week since Nov. 11.

There are a number of issues facing crypto markets right now including low liquidity, a crackdown on the industry from regulators in the U.S. and macroeconomic worries.

Liquidity issues

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“While it is yet unclear the catalyst for today’s sharp drop, the volatility is to be expected given the current state of liquidity, especially after larger market maker Jane Street and Jump Crypto revealed they were winding down their crypto exposure,” Medalie said.

Liquidity has been a big issue for crypto markets since the closure of Silvergate and Signature Bank — two key platforms that people used to buy into the crypto market.

Regulatory scrutiny, congestion issues

The crypto industry is in a battle with U.S. regulators, accusing the SEC and the U.S. government of not laying out clear rules.

Meanwhile, the bitcoin network itself has faced congestion in recent days with Binance last week forced to temporarily halt bitcoin withdrawals. Bitcoin transaction fees spiked this week and while they are coming down, they still remain at elevated levels. The original bitcoin network was not designed to handle high-volume transactions.

“Bitcoin’s attempts to break through $30,000 have come undone amidst a triple whammy of congestion issues on the blockchain, liquidity constraints caused by the scaling back of top market-makers Jane Street and Jump Crypto, and ever-circling regulators,” Antoni Trenchev, co-founder at Nexo, told CNBC via email on Friday.

— CNBC’s Tanaya Macheel and Gina Francolla contributed to this report.

This story originally appeared on CNBC

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