Bitcoin sees heightened volatility – Will it continue?

• Bitcoin price action whipsaws between 78K-95K. 

• Bitcoin liquidations reach almost $1 billion.

• Bitcoin Volatility Index hits a 6-week high. 

• Trump trade tariff worries overshadow crypto strategic reserve news. 

• Institutional demand is weak & STHs are at a loss. 

Bitcoin price action has whipsawed in recent sessions, rebounding from Friday’s low of 78k to a peak of 95k before reversing back to 84k at the time of writing. 

The crypto market quickly erased all gains from President Trump’s Strategic Reserved announcement, plunging 11% in 24 hours to reach a market capitalisation of $2.64 trillion. 

The sharp selloff sparked total liquidations of $976.3 million over the past 24 hours. Of those, $833.2 million were long positions, compared to $143.1 million shorts. Just one day earlier, the crypto market saw short liquidations of $543.9 million against long liquidations of $256.1 million. These figures highlight the market swings and increased volatility.  

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The Bitcoin Volatility Index has risen to its highest level since January 20, when Trump’s inauguration sparked a surge in volatility. High volatility suits a cautious approach from traders using leverage. 

What is causing this spike in volatility? 

The spike in volatility comes as Trump pressed ahead with trade tariffs on Mexico, Canada, and China, raising concerns over the economic outlook. Risk assets such as cryptocurrencies have fallen sharply, US stocks have tumbled, the USD is dropping, and US treasury yields are lower. This market reaction points to fears of an economic slowdown in the US. 

These fears overshadow Trump’s announcement on Sunday of a Crypto Strategic Reserve. Trump’s announcement caused a leap in cryptocurrency valuations, particularly in SOL, XRP, and ADA, as well as ETH and BTC, the tokens to be included in the reserve. However, the rally began to cool even before trade tariff fears really took hold, owing to the lack of details and clarity.  

More details will likely be shared at Friday's upcoming White House Crypto Summit. If officials provide a more in-depth explanation for their reserve plan, this could provide a catalyst for a more sustained move higher for cryptos. 

Will the selloff continue? 

Institutional demand has fallen sharply over the past 10 days, with BTC ETFs experiencing strong outflows. A record $1 billion in Bitcoin ETF outflows was seen on February 25, while outflows across the last week reached a record $2.39 billion, according to SoSoValue data. 

Meanwhile, the Bitcoin Fear and Greed Index remains “fearful,” and the recent slump has pushed the cost basis for Short-Term Holders (STH) into losses. The STH MVRV ratio, which measures the market value divided by the realised value for those holding BTC for less than 155 days, has fallen below 1, meaning holders are at a loss.  

In the previous halving cycle, this didn’t happen until May 2021 before eventually recovering in August. Should a similar scenario arise, the BTC price may remain depressed over the coming weeks/ months before recovering. 

Bitcoin technical analysis 

After facing rejection at 95k, the multi-eek falling trendline and the 23% Fib retracement level of the 49k August low and 109.5k record high, BTC/USD rebounded lower. The price is once again testing the 200 SMA. 

Sellers, supported by momentum, will look to take out the 200 SMA support at 82.4 to retest 78.8k, the 2025 low. A break below here creates a lower low and could extend the bearish move towards 70k. 

Should the 200 SMA hold, buyers could look to rise above the 85k round number before testing the 90k resistance. 

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