Bitcoin investors are bracing for heightened volatility as October unfolds, driven by a mix of factors including geopolitical uncertainty and economic indicators.
According to a recent Bitfinex Alpha report, Bitcoin has experienced more volatility in the first week of October than in the past 200 days. This increase in volatility has caught the attention of analysts who believe it may persist throughout the month.
The report highlights a historical trend where major equity indices, like the S&P 500, experience volatility first, which then spills over to other risk assets such as Bitcoin. The S&P 500’s volatility index rebounded from a multi-year low in mid-September, potentially foreshadowing Bitcoin’s increased volatility.
Impact of War on Bitcoin
Oil prices have rallied after Hamas’ weekend attack in southern Israel, which has seen traders adding a geopolitical risk premium to commodities. The two major crude oil benchmarks were up by nearly 4% in early trading on Monday. Higher oil prices could act as an obstacle to the Federal Reserve’s 2% inflation goal.
Another factor contributing to potential market volatility is the upcoming U.S. inflation reading, scheduled for Thursday. There are concerns that the Consumer Price Index (CPI) could come in lower than expected, potentially impacting digital assets like Bitcoin.
Moreover, the Bitcoin options market is currently pricing in more volatility compared to historical levels. Implied volatility stands at 37.8%, while historical volatility is at 32.4%, according to Bitfinex analysts.
If the Israel-Palestine conflict will affect the #Bitcoin price. They seem unrelated, but I understand the concern: will this geopolitical conflict exacerbate U.S. inflation like the Ukraine war did? This could in turn influence the US economic policies. There are two aspects.
— MyLaDy_Z (@zzlzxzzlzx) October 8, 2023
Despite these uncertainties, Bitcoin has found support above the $27,000 mark. Bitfinex analysts noted a shift in supply dynamics, with short-term holders decreasing their supply by nearly one million coins since April 13th, while long-term holders have increased their supply by over one million BTC during the same period.
As Bitcoin’s price hovers around $27,450, down 1.6% over the past 24 hours, investors are advised to remain vigilant and prepared for ongoing volatility in the crypto market.
