Despite growing calls for bitcoin to surge, participation in the spot market is dwindling, leaving the market vulnerable to unpredictable price swings. The trading volume of BTC has recently dipped below $8 billion, its lowest level since October 2023, according to data from Glassnode. This significant decline in volume, which has been ongoing since early February, may lead to increased market volatility. Glassnode warns that low-volume environments often coincide with reduced market depth and heightened sensitivity to flow shifts, making large orders capable of significantly moving prices.
The market depth, a key indicator of liquidity, is typically measured by analyzing buy and sell orders within 2% of the current price. As market depth shrinks, the market becomes more susceptible to large price movements. However, options traders currently do not seem to be factoring in this scenario, as indicated by the Volmex's BVIV index, which measures BTC's expected 30-day price swings and has dropped to three-month lows below an annualized 42%. This calm outlook may be misplaced, particularly with the Fed's interest rate decision later today.
A hawkish statement could lead to a prolonged pause in rate reductions and potentially even rate increases, capping gains in risk assets. The current market environment is cautious, with positioning and liquidity thinner than usual, making the next market impulse more likely to come from macroeconomic factors than crypto-specific events.
The recent decision by the UAE to leave OPEC and OPEC+ has introduced a new level of uncertainty, particularly in energy politics, which could impact risk assets. As the market waits with bated breath for the Fed's decision, bitcoin's price has remained relatively stable, trading near $77,800 with a 1% gain in 24 hours. 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 lack bullish momentum, while yields on the 10- and two-year U.S. Treasury notes are rising slowly. The close relationship between the 10-year U.S. Treasury note yield and WTI crude prices suggests that oil price volatility may hold the key to the performance of all assets, including cryptocurrencies.