Bitcoin’s price volatility has hit a six-month high, mainly due to macroeconomic concerns such as trade tensions, inflation risks, and economic uncertainty in the U.S.
Bitcoin’s price volatility has hit a six-month high, mainly due to macroeconomic concerns such as trade tensions, inflation risks, and economic uncertainty in the U.S. The cryptocurrency’s 30-day volatility reached 3.6% on Wednesday, up from 1.6% a month ago, according to CoinGlass. While lower than last year’s peak of 4.3%, this increase signals that Bitcoin’s price fluctuations are likely to continue. Analysts, including Greg Magadini of Amberdata, attribute this to broader economic concerns, including Trump’s trade policies and inflation fears. Magadini noted that this high-volatility environment will likely continue until we have further clarity on how tariffs will impact inflation and interest rates.
Bitcoin’s price has fallen 10% over the last month, and more than 20% from its all-time high of over $108,000 in January, according to CoinMarketCap. While Bitcoin’s volatility is expected to reduce over time as the asset matures, it remains strongly correlated with the stock market, adding to its current price instability. Meanwhile, the CBOE Volatility Index (VIX), which measures market fear, recently surged to nearly 30, its highest level since August. The S&P 500 has also lost all of its gains since the 2024 elections.
On Wednesday, the U.S. Federal Reserve decided to keep interest rates steady, with Fed Chairman Jerome Powell acknowledging “unusually high” macroeconomic uncertainty. He also noted that efforts to control inflation might be delayed due to Trump’s tariffs, potentially leading to higher rates for a longer period. This policy uncertainty has contributed to a more cautious investment environment, with many reducing portfolio risk.
Despite Bitcoin’s price decline, Grayscale’s Zach Pandl pointed out that nothing has changed about its long-term outlook as an alternative to the U.S. dollar. Pandl suggested that the current pullback in Bitcoin’s price could present a good entry point for new investors. Last year, Bitcoin's price surged when the Federal Reserve cut interest rates, which traditionally benefits risk assets like Bitcoin by increasing liquidity. However, with the current volatility, Grayscale views this as a temporary setback in an otherwise promising future for Bitcoin as a hedge against inflation.
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