Introduction
The calm in the bitcoin market may be temporary, with potential for significant price volatility.
Current Market Situation
Since March 12, BTC has been consolidating between $80K and $85K, following a drop from $100K due to various factors, including disappointing U.S. BTC reserve purchases and geopolitical concerns.
Volatility Metrics
Key volatility metrics have declined recently, nearing monthly lows; however, low volatility often leads to future turbulence.
Nick Forster, founder of Derive, noted that BTC’s weekly at-the-money (ATM) volatility has dipped below 50% and realized volatility has decreased significantly in the past month.
Mean-Reverting Nature of Volatility
Volatility is typically mean-reverting, indicating it may soon rise again, potentially approaching February levels of 60-70%. This means increased volatility could occur whether prices rise or drop.
Factors Influencing Volatility
Potential catalysts for increased volatility include geopolitical events like the Ukraine conflict and shifts in crypto regulatory policy under President Trump. Additionally, the Federal Reserve’s upcoming rate decision could impact markets.
While a dovish surprise could rekindle bullish sentiment, uncertainties about the U.S. economy could limit the potential for rate cuts.
Conclusion
A rise in volatility could lead to sharp price swings in the crypto market, particularly if equity markets decline further.
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