Despite growing calls for a bitcoin surge, the spot market is experiencing a decline in participation, leaving room for unpredictable price movements. The trading volume of bitcoin, which is the dollar value of BTC changing hands in a day, has recently fallen to under $8 billion, according to data from Glassnode.
This is the lowest level since October 2023, when bitcoin was valued at less than $40,000. The volume has been decreasing since it reached highs above $25 billion in early February. Glassnode notes that such low volume environments often coincide with reduced market depth and increased sensitivity to changes in market flow. Market depth, which is typically measured by looking at buy and sell orders within 2% of the current price, is a key indicator of liquidity in the market.
When market depth decreases, it means that large orders can significantly impact prices. In other words, the decline in volume could lead to increased market volatility, although options traders do not seem to be considering this scenario at present. The BVIV index from Volmex, which measures the expected 30-day price swings of BTC, has dropped to three-month lows below an annualized 42%. This suggests that traders are positioned for a calm market rather than a turbulent one.
It is worth noting that the Fed will be setting interest rates later today, with the focus likely to be on the policy statement's comments on energy market disruptions and rising gas prices. A hawkish statement could lead to a prolonged pause in rate reductions and potentially even rate increases, which would limit gains in risk assets. Marex analysts have stated that 'Bitcoin is sitting around 77k and trading like a market that does not want to commit ahead of the Fed. The tape is calm on the surface, but it is not relaxed.
Positioning is cautious, liquidity is thinner, and the next impulse is more likely to come from macro than anything crypto-native.' They also noted that the big macro curveball is energy politics, and if energy becomes less predictable, risk assets will remain sensitive to headlines. Recently, BTC has been trading near $77,800, up over 1% in 24 hours, with ether, solana, and XRP experiencing similar gains.
The CoinDesk Memecoin Index is leading the market higher, with 3% gains, followed by the Computing Select Index, which is up 2.7%. In traditional markets, the Dollar Index continues to stay below 100, lacking bullish momentum, while yields on the 10- and two-year U.S.
Treasury notes continue to rise slowly. Analysts are not wrong in saying that oil price volatility holds the key to all assets, as the yield on the 10-year U.S.
Treasury note is closely tracking swings in WTI crude prices. If crude prices rise further, the 10-year yield could follow suit, potentially destabilizing financial markets, including cryptocurrencies.