Market Wrap: Bitcoin Dips, Stocks Plummet as Volatility Spikes

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Bitcoin (BTC) declined by nearly 3% from a high of $30,654 on Wednesday, tracking losses in U.S. stock markets, which included a drop of over 1,200 points on the Dow Jones Industrial Average and losses of over 4% on the Nasdaq and S&P 500.

The cryptocurrency has been stuck in a tight trading range over the past few days, although volatility remains elevated. That could increase the risk of greater price swings or a potential breakdown on the charts.

For now, alternative cryptos (altcoins) continue to underperform bitcoin, indicating a lower appetite for risk among crypto traders. For example, ether (ETH) was down by 4% over the past 24 hours, compared with a 3% dip in BTC over the same period. Solana's SOL token declined by 7% and Decentraland's MANA token was down by 10% on Wednesday.

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The stock market declines came after retail and tech stocks underperformed on Wednesday. Also, the Chicago Board Options Exchange's CBOE Volatility Index (VIX), a popular measure of the stock market's expectation of volatility based on S&P 500 index options, ticked higher on Wednesday, reversing a week-long downtrend.

Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.

Volatility returns

Bitcoin's short-term realized volatility remains elevated as the cryptocurrency struggles to hold the $30,000 price level. And implied volatility (based on the market's expectation for movement over one week), ticked higher on Wednesday. That suggests price action could remain choppy as traders react to macroeconomic risk and turmoil in the stablecoin market.

Option market data still shows increased demand for puts versus calls, which means traders are actively hedging the risk of continued price declines.

Currently, the options market places a 66% probability that BTC will trade above $25,000 in June, according to data provided by Skew.

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