Despite growing calls for a bitcoin rally, participation in the spot market is dwindling, leaving the market vulnerable to erratic price fluctuations. The trading volume of BTC has recently dropped below $8 billion, according to Glassnode, marking the lowest level since October 2023 when bitcoin was valued at less than $40,000.

This decline in volume has been ongoing since it peaked above $25 billion in early February. In low-volume environments, market depth often decreases, and the market becomes more sensitive to changes in flow.

Market depth, which is typically measured by analyzing buy and sell orders within 2% of the current price, is a key indicator of liquidity. When market depth shrinks, large orders can significantly impact prices, potentially increasing market volatility.

However, options traders do not seem to be factoring in this scenario at present. The BVIV index, which measures the expected 30-day price swings of BTC, has dropped to three-month lows below an annualized 42%.

Traders appear to be positioned for a calm market rather than anticipating turmoil. This is particularly notable as the Fed is set to announce interest rates later today. While no changes are expected, the policy statement's stance on energy-market disruptions and rising gas prices will be closely watched. 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 noted 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 highlighted the impact of energy politics, stating that 'if energy becomes less predictable, risk assets stay headline-sensitive.' BTC recently traded near $77,800, up over 1% in 24 hours, with other major cryptocurrencies such as ether, solana, and XRP 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 yield on the 10-year U.S.

Treasury note is closely tracking swings in WTI crude prices, and if crude prices rise further, the 10-year yield could follow suit, potentially destabilizing financial markets, including cryptocurrencies.