US Treasury Market Volatility May Derail Bitcoin (BTC) Price Recovery

The U.S. Treasury market is experiencing its highest volatility in four months, potentially jeopardizing an expected bitcoin (BTC) price recovery.

The U.S. Treasury market is now experiencing its highest volatility in four months, potentially jeopardizing an expected bitcoin (BTC) price recovery.

According to Merrill Lynch Option Volatility Estimate Index (MOVE) data, the index, which measures the expected 30-day volatility in the U.S. Treasuries market, has risen to 115, the highest since Nov. 6. It has also increased 38% over the past three weeks.

Increased volatility in the U.S. Treasury notes, which are used as the main collateral, securities and finance in the global financial system, impacts leverage and liquidity in financial markets. This, in turn, leads to less risk appetite in financial markets.

The MOVE index also collapsed following the Nov. 4 election, easing financial conditions that likely aided BTC’s surge to as high as $108,000 from $70,000.

The cryptocurrency’s rally peaked in December-January as the MOVE bottomed out.

Rising U.S. inflation and persistent geopolitical risks have since increased the expected volatility in the U.S. Treasuries market, rendering the 30-day implied volatility on Friday at 115. As the chart shows, the last time the index was trading at this level was in early November

The sharp rise in the MOVE index also coincides with a decline in risk-taking in the cryptocurrency market. BTC is currently trading at around $82,000, having failed to break the $90,000 level despite some analysts forecasting price rallies to $90,000 and higher.

The latest U.S. inflation data for February came in softer-than-expected, which would strengthen the case for Federal Reserve interest-rate cuts. The reading also encouraged some analysts to forecast a bitcoin price recovery.

"With inflation cooling and recession fears still looming but not worsening, Bitcoin could be on the verge of its next major breakout, pushing past the stubborn sub-$90K range," said Matt Mena, Crypto Research Strategist at 21Shares, in an email.

Any upswing, however, could unfold slower than expected.