How Bitcoin Volatility Reacted to the Calming of Trade Conflicts: Crypto Market Overview

As the drama unfolded in the financial markets around potential tariffs, the crypto market showed an interesting pattern: volatility began to decline just as prices continued to rise. On Thursday morning, bitcoin was in the range of $84,300 to $90,600, but the volatility and open interest indicators changed in the opposite direction — this is a classic signal that professional players are taking profits, and speculators are refraining from entering new positions in the futures market.

This paradox of volatility was a consequence of the geopolitical events that unfolded in Davos. When the American president first assuaged fears of military intervention in Greenland and then canceled plans to impose tariffs on European goods, investors’ fears dissipated. Equity markets rose, gold rolled back from highs, and the crypto market closely followed the behavior of stocks, but with clearly less energy among delta hedger speculators.

Derivatives and Falling Hedging Interest

What happened in the derivatives market tells a much more interesting story about volatility than just the numbers on the chart. On Wednesday, price fluctuations caused the liquidation of $593 million worth of positions, spread roughly equally between long and short positions — as Bitcoin fell to $87,200 and then recovered.

But most importantly, the 30-day implied volatility fell from a peak of 44.3 to 40.62, despite the turbulence. This means that options market participants are less willing to pay for insurance against future fluctuations. At the same time, open interest in bitcoin decreased by 0.34% in 24 hours, while the price rose by 0.84% — a classic division between taking profits from short holders and the absence of new buyers in the futures sector.

Financial rates on most crypto pairs remained in the positive zone, which supported bullish sentiment in the market. The exception was Axie Infinity (AXS), which showed negative rates after a seven-day gain of 126% before falling 13.35% this week. The ratio of long to short positions in bitcoin reached 2.04 after recovering from last week’s low of 1.18 — an indicator that indicates the vast majority of long positions among investors.

Metaverses and Privacy Tokens: Divergent Dynamics

The altcoin sector showed a fragmented picture. The metaverse sector is back in the spotlight, with the Sandbox (SAND) jumping and CoinDesk’s Metaverse Select Index starting the week with positive momentum. However, the latest data shows that this euphoria has begun to shake — SAND has fallen by 7.39% over the past day, although historically the project remains promising.

In contrast, privacy tokens have shown heterogeneous behavior. Dash was down 7.19% and Midnight was down 3.75% as optimism about privacy began to fade. Monero and ZCash, although showing previous weekly losses, show more resilience over the past day — ZCash is currently trading at $358.56 with a minimal 7-day decline of 1.69%.

CoinMarketCap’s declared “altcoin season” has shown signs of a long-awaited turnaround, rising from 26/100 to 29/100. This is primarily due to the growth of the metaverse, as well as the better performance of leading altcoins XRP and BNB, which added about 2.5% compared to Bitcoin’s 0.74%.

DeFi and the NFT Ecosystem: Stable Expansion

The decentralized finance sector continues to show resistance to fluctuations in the sector. Total value locked (TVL) is held in a clear uptrend that began in 2023 — a stark contrast to the previous cycle, when TVL unsteadily reached $176 billion before falling catastrophically below $50 billion in a few months.

An interesting development is taking place in the NFT ecosystem, where Pudgy Penguins is establishing itself as one of the strongest native brands in this cycle. In contrast to the speculative “digital luxury” of previous years, the project is expanding into a multi-sector platform. The strategy includes user engagement through traditional channels — toys, retail partnerships, and viral media — followed by integration into Web3 through gaming and the PENGU token. The ecosystem already encompasses physical goods (over $13 million in retail sales), gaming projects, and a distributed token distributed to over 6 million wallets.

XRP: From Optimism to Technical Correction

Against the background of the general recovery of the market, XRP shows more complex dynamics. The coin fell by about 4.90% on the day, dropping from previous positions. Additionally, the decline accelerated after XRP broke through critical support at around $1.87, canceling the gains from previous days. The current price is located at $1.82, where buyers tried to establish a new support base in the range of $1.78-$1.80.

The technical situation requires careful observation. Traders consider the $1.80 level to be a critical shield against a larger drop. To view the scenario in the direction of reversal restoration, a stable consolidation above $1.87–$1.90 is needed, which would signal an attempt to return to positive dynamics, rather than the completion of the correction.

Conclusions on Volatility in the Crypto Market

The current situation demonstrates a critical feature of today’s crypto market: volatility as an indicator can subside at a time when it actually remains high in derivatives financial instruments. This indicates the evolution of the market towards greater structure, where professional participants are more active in using hedging strategies.

The fact that volatility has decreased among options traders just as geopolitical fears have dissipated indicates a healthy market development — investors need less insurance when uncertainty decreases. However, the paradox of downward open interest when prices rise leaves questions about the willingness of new players to enter the derivatives market, which may indicate caution on the part of larger institutions.

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