Cryptocurrency Market Reacts to Macroeconomic Turmoil

The cryptocurrency market was the first to react to the macroeconomic meltdown sweeping through global markets over the weekend. Analyst Bohan Jiang from Abra indicated that more volatility is expected.

Analyst Insights

Jiang stated, “I expect implied volatility to be sustained at an elevated level in the cryptocurrency markets until the macro side calms down,” explaining that many options market participants were unprepared for the downturn.

He noted that recent weeks saw little demand for downside protection, as traders focused on bullish catalysts. Bitcoin implied volatility soared into the high 60s before Trump’s speech, and ether volatility jumped to the low 70s with the upcoming launch of spot Ethereum exchange-traded funds (ETFs). Jiang described the derivatives market as caught off guard by the downturn, highlighted by the CBOE Volatility Index (VIX) surge to over 65 points, marking the highest level since the COVID-19 panic.

Market Reaction and Adjustments

Abra’s Head of Trading, Bob Wallden, remarked that the cryptocurrency market was slow to adapt to the evolving macro situation, still leaning toward an upside bias with minimal downside hedging.

He pointed out the negative turn in the perpetual futures funding rate for bitcoin and ether—the sharpest decline this year—affecting market-wide basis trades. According to Wallden, the market was skewed towards higher moves, which led to a washout of positions and an adjustment in collateral.

Causes of Market Turmoil

Several factors have influenced the current market disruption: a rising Japanese yen, recent U.S. jobs data, fears regarding Federal Reserve policies, geopolitical tensions, and a deflating AI bubble. QCP Capital analysts noted how poor U.S. unemployment data contributed to worsening macro sentiment, and the yen’s strengthening against the dollar provoked volatility spikes as traders unwound carry trades.

Bitfinex analysts link these macro influences to the recent cryptocurrency downturn. They forecast short-term support around the $48,900 range but warn that further price action will depend on macroeconomic conditions.

YouHodler’s Ruslan Lienkha explained that low liquidity over the weekend aggravated the downturn, leading to a wave of margin calls on long positions. While a corrective rebound in bitcoin’s price is possible, its extent may be limited by overall market pessimism.