Bitcoin Volatility Has Eased, But Crypto Futures Show Growing Optimism

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Bitcoin trading has returned to the immobility that characterized the market before US banks went into crisis last month and became a major catalyst for the crypto. Almost a week ago, bitcoin began a three-day descent below $30,000 after just a few days above the mark. Since then, it has been trading sideways. Meanwhile, bitcoin and ether volatility fell below early March levels. Even “implied volatility,” which uses options data to show the market’s expectation of an asset’s likely price movement, is declining, according to Kaiko. However, bitcoin is still holding at a current resistance level seen by some chart analysts, and market participants say investor optimism has survived despite the drop in volatility. “There remains bullish sentiment for bitcoin as the futures market is in contango,” said Michael Dunn, chief product officer at Bitnomial. This means that traders are expecting bitcoin prices to rise and might be willing to pay a premium for longer term futures contracts in anticipation of these higher prices. The reverse was true at the end of 2022. Traders expected future prices to be worse than prevailing spot rates, said Luuk Strijers, trading director at crypto derivatives exchange Deribit. Dunn said spread prices moved above last week’s highs, which could signal limited trading in the near term. The changes in the charts coincide with a change in the Bitcoin narrative. The banking crisis has opened the eyes of many investors to the range of non-speculative use cases for bitcoin, particularly its potential as an alternative banking system. However, investor fears of an impending recession have returned to the fore . As concerns about U.S. banks have faded and inflation has eased, some fear the fallout from the U.S. banking crisis could tip the economy into recession this year. Moreover, inflation is still above the level where the Federal Reserve feels comfortable . The decline in bitcoin’s volatility also comes as the stock market’s “fear index,” the Cboe Volatility Index, fell to around 17 from 26 at the height of the banking crisis. New Volatility Catalysts While the banking crisis briefly revived the crypto market, the tension between the crypto industry and US regulators remains like a dark cloud hanging over it. David Wells, CEO of EnclaveMarkets, said this could mean greater short-term volatility. Even before the start of the Securities and Exchange Commission’s regulatory crackdown on crypto firms in January, the industry was frustrated with the agency’s lack of clarity on how startups should be regulated and its propensity to regulate. by implementing measures. Over the past week, Coinbase and Gemini exchanges have taken steps to expand overseas. “If the current trajectory continues with US banks struggling to support crypto infrastructure companies, that will lead to more volatility because you still have about half of the market based in North America,” Wells said. “Liquidity is so concentrated, and with some of the other big market makers and institutions in the space coming back to risk, it’s concentrating liquidity risk even more in the bigger venues” like Coinbase, he said. added. BTC.CM = 1 million mountain bitcoins (BTC) below $30,000 Market participants were further discouraged last week as SEC Chairman Gary Gensler defended both his crackdown and his approach to the crypto industry. On Monday, Coinbase filed a legal challenge against the SEC, hoping to force it to publicly clarify whether it would allow the crypto industry to be regulated using existing SEC frameworks, after months of silence. from the agency. Riyad Carey, research analyst at Kaiko, said he was looking a little further afield for bitcoin’s next big mover for the next halving, a year from now. “The next major crypto-specific catalyst on the horizon is likely the bitcoin halving,” he said. “The drop in volatility seems to be a reflection of the lack of crypto-specific catalysts in the near future. The Ethereum upgrade went without any real fireworks and we seem to have gotten a break after collapse of crypto companies at the moment.”

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