The fading of volatility amid tariff fluctuations

Major cryptocurrencies are beginning to show stability after the fears triggered by trade policies. Bitcoin and digital assets in general are experiencing a fade of the tension that dominated markets just 24 hours ago, amid a clear rotation toward risk assets and a notable decrease in speculative appetite.

During Thursday’s session, Bitcoin fluctuated between $87,700 and $90,600, with the current price around $87,940, reflecting a 1.61% drop in the last 24 hours. The most relevant thing is not the price movement but what is happening beneath the surface: the 30-day implied volatility contracted from a high of 44.3 to 40.62, while open interest in futures fell 0.34% despite rising prices, an unequivocal sign of profit-taking among speculative traders.

Derivatives Dynamics: When Stability Signals Weakness

The derivatives market shows a significant change in sentiment after Wednesday’s volatility. Liquidations reached $593 million when Bitcoin sharply dropped to $87,200 before recovering, affecting both long and short positions evenly. This typical leverage adjustment scenario reveals that, amid so much activity, the market is in a consolidation phase.

Funding rates across most cryptocurrency pairs remain positive, indicating a bullish bias, though with some interesting exceptions. Axie Infinity (AXS) has negative rates despite gaining 126% in seven days, a relative fade of its rally after traders started taking profits. Currently, AXS is down 9.95% in the last seven days.

The long/short ratio for Bitcoin stands at 2.04, up from previous lows of 1.18, reflecting a persistent bullish inclination among speculators despite recent volatility.

Capital Rotation: The Rise of the Metaverse Amid Rotations

While Bitcoin trades under pressure, the metaverse sector takes the spotlight in terms of narrative. Sandbox (SAND), the main token in the segment, experienced significant gains days ago, though it is currently showing a 5.48% correction in 24 hours. The CoinDesk Select Metaverse Index has gained 6.58% since midnight UTC and 50.8% since the beginning of the year, demonstrating that the gains from the fade of concerns are being channeled into more specific risk segments.

In contrast, privacy tokens continue to lag. Dash (DASH) fell 7.08% in 24 hours, Midnight (NIGHT) declined 2.92%, while Monero (XMR) and Zcash (ZEC) show mixed results, with ZEC gaining 1.91% in seven days. This pattern suggests traders are moving away from more speculative narratives and focusing on projects with perceived utility.

The “altcoin season” indicator from CoinMarketCap moved from 26/100 to 29/100, driven by both the metaverse rally and gains in XRP (-2.64% in 24 hours) and BNB (-0.29%), which gained about 2.5% in recent days.

The DeFi Landscape: Strength in Times of Doubt

The decentralized finance sector continues to show resilience, with the total value locked (TVL) dominated by stablecoins maintaining a clear upward trend since 2023. This performance contrasts sharply with the previous cycle when TVL reached unsustainable $176 billion before collapsing.

Ethereum (ETH), the main network for DeFi applications, is trading at $2,950 with a 2.15% decline in 24 hours. Despite this short-term pressure, the fundamental strength of the DeFi ecosystem suggests investors remain confident in the sector’s fundamentals.

The Enigma of the Weak Dollar: Why Bitcoin Is Not Following

One of the most intriguing phenomena in the current market is the divergence between the weakness of the US dollar and Bitcoin’s performance. JPMorgan strategists offer an explanation: the dollar’s decline is due to “short-term flows and sentiment, not fundamental changes in growth expectations or monetary policy.” They expect the currency to stabilize as the US economy shows strength.

Amid this perception that the dollar’s weakness is temporary, Bitcoin is traded more as a risk asset sensitive to liquidity than as a reliable hedge against the US dollar. This explains why gold retreated from all-time highs and why emerging markets, not Bitcoin, have become the preferred beneficiaries of dollar diversification.

This shift in behavior marks a fade in the traditional narrative of Bitcoin as a store of value, at least in the current macroeconomic context. The market is prioritizing assets with immediate return potential over long-term hedges.