Bitcoin (BTC) Market Faces Intense Volatility as Investors Speculate on US Digital Asset Reserve

Glassnode reported that over the past few weeks, significant sell-side pressure has triggered sharp price movements, causing concern among investors.

The crypto market has faced intense volatility in recent times, driven by economic uncertainty and speculation surrounding a potential US Strategic Digital Asset Reserve.

According to Glassnode, over the past few weeks, significant sell-side pressure has triggered sharp price movements, causing concern among investors.

A quick but strong rally followed the news that Bitcoin, Ethereum, Solana, Cardano, and XRP would be included in the reserve scheme. The surge was brief, however, and the prices reversed the gains to bring about a “sell-the-news” scenario.

Bitcoin was more resilient due to its deep liquidity and large market, which limited extreme price volatility. Ethereum and Solana dropped precipitously, losing more than 50% from their highs throughout the cycle.

The downward movement in the global market was accompanied by an appreciation of the US dollar, which has historically led to liquidity squeezes in risky assets. The 24/7 traded digital assets reacted first to the market volatility.

Bitcoin’s Realized Volatility Surges Past 80%

The realized volatility in Bitcoin has risen to well over 80%, some of the highest this cycle. This aligns with the strong volatility in the global markets.

A major catalyst for this drop has been the intense selling pressure from each investor group, regardless of the wallet size. The selling has gained momentum starting from mid-January, leading to a market-wide correction.

Bitcoin dropped to below $86K, testing bullish support within a low-traded area. On-chain data shows 150K BTC worth $14.2B was bought there between Feb 26 to Mar 3. The spike suggests top-notch buyers are likely to be cutting losses.

Peak losses reached a daily high of $818M during the cycle’s highest capitulation. The only greater loss was the unwinding of the August 2024 yen-carry trade for $1.34B. Meanwhile, Short-Term Holders are suffering heavy losses that are making it difficult for new investors.

Key Support Levels: $92K and $71K

Given the sharp drop, Bitcoin’s drawdown is in keeping with historical trends. At 28% from its all-time high, Bitcoin’s holding firm shows that underlying demand is quite strong.

Compared to previous market cycles, the earlier ones saw 30%+ drawdowns, some 50%+.

Short-term holder cost basis measures indicate that key price levels to monitor are $92,000 for near-term support and $71,000 for the lower boundary.

If market conditions worsen further, Bitcoin’s sustainability of these levels will be the deciding factor in how it behaves next. The next couple of weeks will test whether investors shift to cover these support zones or if capitulation lies ahead.