Despite growing calls for a bitcoin rally, participation in the spot market is dwindling, leaving the market vulnerable to erratic price movements. The trading volume of bitcoin has recently dropped below $8 billion, according to Glassnode, marking its lowest point since October 2023 when the cryptocurrency was valued at less than $40,000. This significant decline in volume, which has been ongoing since reaching highs above $25 billion in early February, may lead to heightened market volatility.
Market depth, a measure of liquidity, is also shrinking, making the market more susceptible to large price swings triggered by a few substantial orders. However, options traders seem to be overlooking this possibility, as indicated by the Volmex BVIV index, which has fallen to three-month lows below an annualized 42%. The Federal Reserve's upcoming interest rate decision is also being closely watched, with a hawkish statement potentially leading to a prolonged pause in rate cuts and even possible rate hikes, which could cap gains in risk assets. Analysts at Marex note that bitcoin is currently trading cautiously ahead of the Fed's decision, with positioning and liquidity thinner than usual, making the market more sensitive to macroeconomic factors.
The energy market, particularly the recent decision by the UAE to leave OPEC and OPEC+, is also being closely monitored, as it could introduce unpredictability and keep risk assets on high alert. Bitcoin recently traded near $77,800, up over 1% in 24 hours, while other cryptocurrencies such as ether, solana, and XRP also saw similar gains. The CoinDesk Memecoin Index led the market higher with 3% gains, followed by the Computing Select Index, which rose 2.7%.
In traditional markets, the Dollar Index remains below 100, lacking bullish momentum, but yields on the 10- and two-year U.S. Treasury notes continue to rise slowly.
The close correlation between the 10-year U.S. Treasury note yield and WTI crude prices is also worth noting, as rising crude prices could lead to higher yields and tighter financial conditions across markets, including cryptocurrencies.