Despite growing calls for bitcoin to surge, participation in the spot market is dwindling, leaving the market vulnerable to erratic price swings. The trading volume of bitcoin has recently dropped to under $8 billion, the lowest 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, could lead to reduced market depth and increased sensitivity to changes in market flow. As a result, even small orders can significantly impact prices, potentially boosting market volatility. However, options traders seem to be underestimating this scenario, with the BVIV index, which measures expected 30-day price swings, dropping to three-month lows below an annualized 42%.
The Federal Reserve's interest rate decision later today is also a key factor to watch, as a hawkish statement could lead to a prolonged pause in rate reductions and potentially even rate increases, capping gains in risk assets. Analysts at Marex note that 'bitcoin is sitting around 77k and trading like a market that does not want to commit ahead of the Fed,' with positioning being cautious and liquidity thinner.
The next market impulse is more likely to come from macroeconomic factors than anything specific to crypto. The recent decision by the UAE to leave OPEC and OPEC+ has added to the uncertainty, making risk assets more sensitive to headlines. Bitcoin recently traded near $77,800, up over 1% in 24 hours, with other major cryptocurrencies like ether, solana, and XRP also seeing 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, while yields on the 10- and two-year U.S. Treasury notes continue to rise slowly.
The close relationship between the 10-year U.S. Treasury note yield and WTI crude prices is also worth noting, as changes in oil price volatility can have a significant impact on all assets.