Bitcoin’s volatility has surged to a six-month high, driven by U.S. economic uncertainties related to trade tensions and inflation risks. The cryptocurrency’s 30-day volatility reached 3.6%, correlating closely with stock market trends. Analysts suggest that the high-volatility environment may persist until economic clarity on tariffs and inflation is achieved. Despite a price decline, experts maintain a positive long-term outlook for Bitcoin as an investment alternative.

Bitcoin’s price volatility has recently surged to a six-month high, chiefly due to various macroeconomic concerns such as trade tensions, inflation risks, and general economic instability in the United States. According to CoinGlass, the cryptocurrency’s 30-day volatility jumped to 3.6% on Wednesday from 1.6% a month ago. Although this figure is lower than the peak of 4.3% observed last year, the rising volatility indicates that fluctuations in Bitcoin’s price are likely to persist. Analysts, including Greg Magadini from Amberdata, suggest that uncertainty surrounding Trump’s trade policies and inflation fears contribute to this high-volatility environment, which may remain until there is more clarity regarding the impact of tariffs on inflation and interest rates.

Over the past month, Bitcoin’s price has fallen by 10% and has decreased more than 20% from its all-time high exceeding $108,000 in January, as reported by CoinMarketCap. Despite an anticipated reduction in Bitcoin’s volatility as it matures, its price remains highly correlated with stock market trends, adding to current instability. Concurrently, the CBOE Volatility Index (VIX), a measure of market fear, has escalated to nearly 30, marking its highest level since August. The S&P 500 index has also experienced a significant loss, erasing all gains realized since the 2024 elections.

On Wednesday, the U.S. Federal Reserve opted to maintain steady interest rates, with Fed Chairman Jerome Powell acknowledging the presence of “unusually high” macroeconomic uncertainty. Powell cautioned that measures aimed at controlling inflation might be postponed as a result of Trump’s tariffs, which could lead to the persistence of elevated rates. This environment of policy uncertainty has made investors more cautious, leading many to reduce their portfolio risks.

In spite of the price decline, Zach Pandl from Grayscale maintains that the long-term outlook for Bitcoin as an alternative to the U.S. dollar remains unchanged. He posits that the current dip in Bitcoin’s price may represent a favorable entry point for potential investors. Last year, Bitcoin experienced significant price gains when the Federal Reserve lowered interest rates, which typically benefits risk assets like Bitcoin by increasing market liquidity. Given the ongoing volatility, Grayscale perceives this situation as a temporary setback in Bitcoin’s promising potential as a hedge against inflation.

In summary, Bitcoin’s volatility has reached a six-month high, driven by broader economic uncertainties, including trade tensions and inflation risks. This sustained volatility, along with a significant recent price decline, showcases the cryptocurrency’s strong correlation with the stock market amidst macroeconomic concerns. Despite these challenges, experts suggest potential opportunities for investors to enter the market, as the long-term outlook for Bitcoin remains positive.

Original Source: coinmarketcap.com

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