Bitcoin Volatility Increases, Expected to Continue
The first week of October saw a rise in Bitcoin volatility, with analysts predicting that this trend will persist throughout the month. According to a report from Bitfinex Alpha, Bitcoin has been more volatile than the past 200 days on average. This aligns with a historical pattern where major equity indices experience volatility before it spills over into other risk assets like Bitcoin.
The report highlighted the rebound of the volatility index for the S&P 500, which hit a multi-year low on September 15. It also mentioned a specific event on October 2 when historical 24-hour volatility increased by over 340%. The options market for Bitcoin is currently pricing in more volatility compared to the past, with implied volatility standing at 37.8% while historical volatility is at 32.4%.
U.S. Inflation Reading as an Inflection Point
Another factor that could contribute to cryptocurrency market volatility is this week’s U.S. inflation reading. Luke Nolan, a CoinShares Ethereum Research Associate, believes that the Consumer Price Index (CPI) announcement on Thursday could bring significant volatility to both Bitcoin and the wider crypto market. There are expectations that the CPI could come in lower than previously forecasted.
In contrast, oil prices have rallied due to an attack in southern Israel by Hamas, leading traders to add a geopolitical risk premium to commodities. Higher oil prices may pose an obstacle to the Federal Reserve’s inflation goal of 2%. Despite these factors, Bitcoin’s price remains supported above the $27,000 level.
Hot Take: Bitcoin Volatility Surges Amidst Market Uncertainty
Bitcoin has experienced increased volatility during the first week of October and analysts anticipate this trend to continue throughout the month. The historical pattern of major equity indices experiencing volatility before it spills over to other risk assets like Bitcoin has been observed. Additionally, the options market for Bitcoin is pricing in more volatility compared to historical levels. The upcoming U.S. inflation reading is expected to be an inflection point for market volatility, with potential impacts on digital assets. Despite uncertainties such as higher oil prices and geopolitical risks, Bitcoin’s price remains supported above $27,000.
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