Bitfinex Alpha | Bitcoin volatility comes as US interest rates are expected to remain higher for an extended period of time.

October 23 Bitfinex Alpha | Bitcoin volatility comes as US interest rates are expected to remain higher for an extended period of time.

For over two months, Bitfinex Alpha has been predicting increased volatility, and recent events have confirmed these predictions. Bitcoin’s 24-hour volatility witnessed a stunning 1,200% surge in just nine hours on October 16 as the asset crossed the $30,000 threshold. On-chain indicators such as Spent Output Age Bands (SOAB) further support the notion of continued volatility in the coming months.

Bitcoin’s surge from $28,000 to $30,000 on October 16 was triggered by unconfirmed rumors that the SEC had approved BlackRock’s application for an iShares Bitcoin ETF. However, this surge was short-lived, with assets shrinking to around $28,000, resulting in over $136 million, the largest short-term liquidation since August 17. The initial price increase was driven by market buying in the futures market, which added more than $5.5 billion within an hour. However, this momentum was short-lived and subsequent volatility fluctuations resulted in a total liquidation of $187 million in long and short positions. Last week’s moves highlight the cryptocurrency market’s sensitivity to large transactions, especially during periods of low liquidity. The sharp price movements were not just due to a short squeeze, but were largely influenced by the market’s immediate reaction to the spot ETF news. This highlights the market’s sensitivity to major news narratives. It posts a breach of $30,000 and then falls below $28,000.

Bitcoin has already made two subsequent attempts to regain the $30,000 mark, ultimately succeeding on Monday, October 23rd.

Looking at economic trends over the past week, it is clear that certain sectors of the U.S. economy are showing off their resilience while others are sending subtle signals of caution.

Last week, the 10-year Treasury yield neared 5%. This is a psychologically significant level not seen in 16 years. While higher Treasury yields are associated with rising interest rates, last week’s rise in yields highlights our expectation that interest rates will remain higher for an extended period of time.

In the consumer sector, U.S. retail sales exceeded market expectations. Strong consumer spending not only ended the third quarter on a positive note, but also raised expectations that third-quarter GDP could surpass the previous quarter. The labor market also continued to be strong, with unemployment claims for the week ending October 14 plummeting to their lowest level in nine months. Despite high unemployment figures, there continue to be signs of cooling in the labor market.

For the housing sector, September was a breath of fresh air after an uneasy slump in August. This uptick, led by the multifamily homebuilding sector, offers a glimmer of hope, but caution remains among market observers.

As cryptocurrency acceptance grows, luxury car giant Ferrari has teamed up with BitPay to facilitate cryptocurrency payments. However, not everything goes smoothly in the cryptocurrency world. The New York Attorney General has launched a lawsuit against industry stalwarts Gemini Trust, Genesis Global Capital, and Digital Current Group (DCG), alleging massive fraud of more than $1 billion through the Gemini Earn program.

Finally, we discuss changes in El Salvador two years after adopting Bitcoin as fiat currency.

Happy trading!