The U.S. Treasury market is currently experiencing its highest level of volatility in the past four months, which could jeopardize the anticipated recovery in bitcoin (BTC) prices.
Recent U.S. inflation data for February came in below expectations, bolstering the argument for potential interest rate cuts from the Federal Reserve. This data has prompted some analysts to project a recovery in bitcoin prices to $90,000 and beyond, with the current value hovering around $82,000.
“With inflation easing and recession worries still present but not escalating, Bitcoin may be nearing its next significant breakout, potentially surpassing the challenging sub-$90K range,” stated a Crypto Research Strategist in an email.
However, any upward movement could take longer than anticipated, as indicated by the Merrill Lynch Option Volatility Estimate Index (MOVE). This index, which gauges the expected 30-day volatility in the U.S. Treasuries market, has surged to 115, marking the highest point since November 6, according to TradingView data. It has increased by 38% over the last three weeks.
Heightened volatility in U.S. Treasury notes, which play a dominant role in global collateral, securities, and finance, negatively affects leverage and liquidity across financial markets. This often results in diminished risk appetites within those markets.
The MOVE index plummeted after the election on November 4, leading to more favorable financial conditions that likely contributed to BTC’s rise from $70,000 to as high as $108,000.
The cryptocurrency’s rally reached its peak between December and January as the MOVE index hit its lowest point.