#MarketRebound

Bitcoin is Crashing—Will it Rebound?

The crypto tends to increase in volatility into upside moves and decrease in volatility into downside moves

Bitcoin has plunged in value this month.

But is hasn’t declined as much as Ethereum and Solana.

Bitcoin is negatively correlated to rate changes and dollar strength

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Bitcoin is Crashing—Will it Rebound?

Bitcoin

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Jun 25, 2024

Bitcoin is Crashing—Will it Rebound?

By:Nick Battista

The crypto tends to increase in volatility into upside moves and decrease in volatility into downside moves

Bitcoin has plunged in value this month.

But is hasn’t declined as much as Ethereum and Solana.

Bitcoin is negatively correlated to rate changes and dollar strength.

Bitcoin (BTN) has seen significant downside over the month of June, hitting highs near $72,000 with lows trading in the $59,000 handle. Bitcoin tends to be the leader of the pack—as seen in comparison to Ethereum (ETH) and Solana (SOL), which have seen greater downside moves over the last month.

Crypto market update

Bitcoin has an interesting volatility skew. It tends to increase in volatility into upside moves and decrease in volatility into downside moves. This is contrary to most asset classes. The S&P 500, for example, sees downside put skew. As prices go down, volatility in SPY tends to increase, meaning future price movements are expected to be greater. That’s why the expected move in Bitcoin seems relatively small—volatility is near historical lows. For context, 2021 saw highs in implied volatility north of 140%, contributing to this upside potential "asymmetric" returns associated with Bitcoin.

What's driving the Bitcoin weakness?

Risk on assets like stocks or crypto tend to be liquidity-driven and tend to move in a correlated fashion. Over the last month, we've seen expectations for future rate cuts decrease, and the strength in the dollar increase as a result. Without binary catalysts like earnings or business cycles, Bitcoin has remained much more negatively correlated to