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 dropped below $8 billion, its lowest level since October 2023, according to data from Glassnode. This significant decline in volume, which has been falling 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 sensitive to large orders.
The Volmex BVIV index, which measures expected 30-day price fluctuations, has dropped to three-month lows, indicating that traders are not anticipating significant volatility. However, the upcoming Fed interest rate decision may impact the market, particularly if the policy statement expresses concern over growth and inflation risks.
Analysts warn that a hawkish statement could lead to a prolonged pause in rate reductions, potentially capping gains in risk assets. The current market environment is cautious, with positioning and liquidity thinner than usual, making the next market move more likely to be driven by macroeconomic factors than crypto-specific news. The energy market, particularly the recent decision by the UAE to leave OPEC and OPEC+, may also impact risk assets.
Bitcoin's price is currently stable, but analysts warn that the market is not relaxed, and the next impulse is likely to come from macroeconomic factors rather than crypto-native news.