Are Crypto Markets Preparing For A Volatility Spike?

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Bitcoin (BTC) managed to pick up a win yesterday by hitting the midnight bell a fraction higher at US$28,170.

Today, BTC/USDT is down around 0.4%, dipping just below the hard-fought 28,000 barrier.

This was one of the longest sideways trades we have seen for the benchmark cryptocurrency in a long time.

Is bitcoin volatility here to stay? Source: currency.com

Despite the subdued price action, at least compared to the wild upside swings we saw in mid-March, the Bitcoin Volatility Index remains high, i.e. the risk factor is still going strong with bitcoin.

Volatility is likely elevated due to reduced liquidity in the market, which is unsurprising given the multitude of headwinds in the cryptocurrency industry, from regulatory disputes against major fiat-on-ramps crypto, to macro factors such as economic uncertainty and interest rate hikes.

12-Month Volatility of Bitcoin Source coinglass.com

There is a feeling that the short-lived revival of bitcoin’s safe-haven status during the recent crisis in traditional finance is once again becoming a speculative game for investors. If so, bigger price swings could be on the horizon.

Ethereum (ETH), meanwhile, hit a six-month high of US$1,940 yesterday, closing more than 2% higher.

ETH/USDT has since pulled back to $1,880, but remains significantly stronger than bitcoin in the near term, with ETH/BTC gaining 5.5% over the past seven days.

As noted in yesterday’s Market Report, there is hype around the pending Shanghai upgrade that will see up to 16 million staked Ether coins unlocked from hibernation.

ETH bulls should be wary of large-scale selling pressures when releasing these tokens if holders decide to take profits.

On the bright side, the staked ETH coins shouldn’t be released all at once, which eases the fears somewhat.

Mixed bag of altcoins

The recent rally in Ripple (XRP) appears to have run out of steam, with the payment token slipping into losses of 7% week-on-week.

The Ripple Army was excited about a pending ruling in the long-running SEC securities litigation against Ripple Labs, but so far nothing has emerged.

The other altcoin leader of the day, Dogecoin (DOGE) remains 21% higher week over week, although the meme coin has racked up around 5% losses overnight.

DOGE was on fire after Mr. DOGE himself, Elon Musk, changed Twitter’s blue bird logo to Shiba Inu, a synonym for Dogecoin, although the bulls came to the conclusion that this did not change the underlying fundamentals nor the utility of the crypto asset.

Major overnight risers included blockchain network Klaytn, Trust Wallets token TWT, and decentralized finance (DeFi) tokenmaker (MKR).

Global cryptocurrency market cap fell 1.3% to $1.19 billion overnight, while total value locked in the DeFi space fell 0.6% to $50.8 billion of dollars.

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