Bitcoin’s price volatility has reached a six-month high, driven by macroeconomic uncertainties, including trade tensions, inflation risks, and the ongoing economic instability in the U.S. According to CoinGlass, the cryptocurrency’s 30-day volatility hit 3.6% on Wednesday, a significant increase from 1.6% just a month ago. Although this is lower than last year’s peak of 4.3%, the rise in volatility signals that Bitcoin’s price fluctuations are expected to persist.
Factors Driving Bitcoin’s Volatility
Analysts, such as Greg Magadini from Amberdata, attribute this surge in volatility to broader economic issues, particularly President Trump’s trade policies and inflation fears. Magadini suggested that the high-volatility environment will likely continue until there is more clarity on how tariffs will affect inflation and interest rates.
Bitcoin’s price has dropped 10% over the past month and more than 20% from its record high of over $108,000 in January, according to CoinMarketCap. Despite the expectation that Bitcoin’s volatility will decrease over time as the asset matures, it remains closely tied to the stock market, amplifying its current price instability.
Broader Market Impact: Volatility Across the U.S. Stock Market
Meanwhile, the CBOE Volatility Index (VIX), a measure of market fear, recently spiked to nearly 30, its highest level since August. The S&P 500 has also experienced a significant loss, erasing all gains made since the 2024 elections.
Federal Reserve’s Decision and Economic Uncertainty
On Wednesday, the U.S. Federal Reserve decided to keep interest rates unchanged, with Fed Chairman Jerome Powell acknowledging “unusually high” macroeconomic uncertainty. Powell also stated that efforts to control inflation might be delayed due to Trump’s tariffs, which could lead to higher rates for a longer period. This policy uncertainty has led to a more cautious investment environment, prompting many investors to reduce their portfolio risk.
Grayscale’s Long-Term Outlook for Bitcoin
Despite Bitcoin’s recent price decline, Zach Pandl from Grayscale emphasized that the cryptocurrency’s long-term potential as an alternative to the U.S. dollar remains intact. Pandl suggested that the current dip could offer a good entry point for new investors. He noted that Bitcoin’s price surged last year when the Federal Reserve cut interest rates, which typically benefits risk assets like Bitcoin by increasing liquidity. However, Grayscale views the current volatility as a temporary setback and remains optimistic about Bitcoin’s future as a hedge against inflation.
Related topics:
