Despite growing calls for a bitcoin rally, spot market participation is dwindling, leaving the market vulnerable to erratic price movements. The daily trading volume of BTC has recently fallen below $8 billion, its lowest level since October 2023, according to data from Glassnode.
This significant decline in volume, which has been ongoing since reaching highs above $25 billion in early February, raises concerns about reduced market depth and increased sensitivity to changes in market flow. As market depth decreases, the potential for large orders to significantly impact prices grows, which could lead to heightened market volatility.
However, options traders currently do not seem to be factoring in this scenario, as indicated by the Volmex BVIV index, which measures expected 30-day price swings for BTC and has dropped to three-month lows below an annualized 42%. The Federal Reserve's upcoming interest rate decision, scheduled for later today, will be closely watched, particularly for any comments on energy market disruptions and rising gas prices, which could influence the trajectory of risk assets.
Analysts at Marex note that bitcoin is currently trading cautiously ahead of the Fed's decision, with positioning indicating a wait-and-see approach. The energy market, particularly the recent decision by the UAE to leave OPEC and OPEC+, is seen as a significant macro factor that could impact risk assets. Bitcoin recently traded near $77,800, up over 1% in 24 hours, with other major cryptocurrencies such as ether, solana, and XRP also seeing similar gains. The CoinDesk Memecoin Index led the market higher, with a 3% increase, followed by the Computing Select Index, which rose 2.7%.
In traditional markets, the Dollar Index remains below 100, lacking upward momentum, while yields on the 10- and two-year U.S. Treasury notes continue to rise, albeit slowly.
The close relationship between oil price volatility and the yield on the 10-year U.S. Treasury note is also worth noting, as changes in crude prices can have far-reaching implications for financial markets, including cryptocurrencies.