Despite growing calls for a bitcoin rally, participation in the spot market is dwindling, leaving the market vulnerable to unpredictable price swings. The daily trading volume of bitcoin has recently fallen below $8 billion, its lowest level since October 2023, according to data from Glassnode. This significant decline in volume, which has been ongoing since reaching highs above $25 billion in early February, may lead to increased market volatility.
Market depth, a measure of liquidity, is also shrinking, making the market more susceptible to large price movements. The BVIV index, which tracks expected 30-day price fluctuations, has dropped to a three-month low, indicating that traders are not anticipating significant price swings.
However, with the Fed set to announce interest rates later today, a hawkish statement could lead to a prolonged pause in rate cuts and potentially even rate increases, capping gains in risk assets. Analysts warn that the market is cautious, with thin liquidity, and the next major move is likely to be driven by macroeconomic factors rather than crypto-specific news. The recent decision by the UAE to leave OPEC and OPEC+ has added to the uncertainty, with energy politics becoming a significant factor in the market.
Bitcoin is currently trading near $77,800, up over 1% in the past 24 hours, while other major cryptocurrencies such as ether, solana, and XRP have also seen similar gains. The CoinDesk Memecoin Index is leading the market, with a 3% increase, followed by the Computing Select Index, which is up 2.7%. In traditional markets, the Dollar Index remains below 100, lacking upward momentum, while yields on the 10- and two-year U.S.
Treasury notes continue to rise. The close correlation between the 10-year U.S.
Treasury note yield and WTI crude prices suggests that oil price volatility may hold the key to the performance of all assets, including cryptocurrencies.