Analysts think that Bitcoin will most likely show price volatility this month as liquidity significantly exacerbates but one metric could signal the next big rally of the world's largest crypto asset by market capitalization.

The banking crisis in the U.S. which started last month with the collapse of Silvergate, followed by Silicon Valley Bank and Signature Bank highlighted the resilience of Bitcoin and the broader crypto market when these digital assets continued to trade in the green zone, with Bitcoin gaining nearly 70% when Q1 2023 ended.

Interestingly, BTC is anticipated to show more price volatility this month according to analysts, who believe that investors will most likely pay more on trades because of slippages or because of the difference between the trade execution and the expected price.

This difference underlines the worsening liquidity and points to the high likelihood of volatile price swings of the maiden crypto.

Bitcoin trading volumes have collapsed, "which inevitably makes for a more volatile market," City Index senior financial markets analyst Fiona Cincotta said, adding that "the sharp drop in volumes means that it's easier for large orders to move the BTC prices."

She also advised investors to "sit tight," noting that "there could be more wild swings coming. Falling volumes point to [a] waning appetite for Bitcoin at its recent higher levels."

Kaiko research analyst Conor Ryder said that the situation is "more indicative of the institutional reluctance to offer liquidity in the space," adding that "a lot of crypto firms don't want to get caught in the middle of a battle between US regulators and exchanges."

But, it is not all gloom and doom for the world's first-ever crypto asset since according to crypto analytics platform Santiment, there is one metric that could signal the next massive price rally of the crypto asset.

According to the firm, investors and traders alike should watch out for stablecoins like Tether (USDT), USD Coin (USDC), Binance USD (BUSD), Pax Dollar (USPD) and Dai (DAI), noting that Bitcoin's sustained surge could depend on the growth of these top five stablecoins based on market capitalization.

"As a great Q1 comes to an end for the recovering crypto markets, the combined buying power for USDT, USDC, BUSD, DAI, and USDP is $126.3 billion. The decline has tapered off this week. A rise would signal a major increased probability of Bitcoin rising," the firm noted.

Bitcoin saw a 1.16% gain over the past 24 hours and was trading up $28,107.82 with a 24-hour volume of $19,379,332,263 as of 3:31 a.m. ET on Tuesday, according to the latest data from CoinMarketCap.

Illustration of Bitcoin