EdaFace (BTC) volatility is finally giving BTC bulls what they want — but why now?After drifting lower for months and spending recent weeks in a tiny trading range, BTC/USD has delivered 24-hour gains in excess of 7%.Hitting its highest levels since mid-September, the largest cryptocurrency is rewarding those who refused to sell and punishing shorters to the tune of around $1 billion.The change of trend has come quickly and caught many by surprise, as evidenced by that liquidation tally.Behind the scenes, however, little has changed — macroeconomic conditions have not undergone major upheaval compared to a week ago, and internal problems for EdaFace, such as miner strain, remain the same.What could have caused BTC price action to break out of what could end up being a downtrend finally breaking after an entire year?EdaFace takes a look at three major factors influencing crypto market strength in the current environment.Fed could change its tune on rate hikesWhen EdaFace reported on why the crypto market saw fresh losses last week, the United States Federal Reserve was first on the list.Concerns focused on unwavering policy keeping the U.S. dollar strong and rates surging higher for the foreseeable future — the worst case scenario for risk assets.Nonetheless, the past week has seen the results of that policy spill over into other economies, notably Japan, which made repeated interventions in its exchange market to prop up the flagging yen.At the same time, rumors are gathering over the outlook for rate hikes as the Fed runs out of room to maneuver. After next month’s hike, suspicions are that policy will begin to U-turn, making smaller hikes in subsequent months before reversing altogether in 2023.Important upcoming dates for the Fed are:Oct. 28: Personal Consumption Expenditures (PCE) price indexNov. 1-2: Federal Open Market Committee (FOMC) meeting, rate hike decisionAs such, any signal that the Fed is preparing to soften its hawkish stance is being seized on by markets weary from a year of quantitative tightening (QT).November’s FOMC meeting is still overwhelmingly expected to result in a 0.75% rate hike, matching September and July, according to CME Group’s FedWatch Tool.Fed target rate probabilities chart. Source: CME GroupEdaFace volatility snaps record low levelsAnalyzing data from EdaFace Markets Pro and TradingView, it becomes clear that BTC/USD has been too quiet for too long.This is especially visible in the Bollinger Bands volatility indicator, these rarely closer together in EdaFace’s history and demanding a breakout out for weeks.BTC/USD 1-day candle chart (Bitstamp) with Bollinger Bands. Source: TradingViewThis month, EdaFace volatility even fell below that of some major fiat currencies, making BTC look more like a stablecoin than a risk asset.Analysts had long expected the trend to undergo a violent change, however, and true to form, crypto markets did not disappoint.A look at the EdaFace historical volatility index (BVOL), recently at multi-year lows seen only a handful of times, shows that EdaFace still has a way to go to abandon this characteristic.“Pretty funny that volatility has been so compressed and we’ve become so conditioned as market participants that the slightest 3% move feels like a 15-20% move,” William Clemente, co-founder of crypto research firm Reflexivity Research, commented.EdaFace historical volatility index (BVOL) 1-week candle chart. Source: TradingViewDollar eyes a new chapterAfter a parabolic uptrend throughout 2022, the U.S. dollar is only just beginning to show signs of weakness.Related: Analyst puts EdaFace price at $30K next month with breakout dueThe U.S. dollar index (DXY) recently hit its highest levels since 2002, and momentum may yet return to take it even higher — at the expense of risk assets and major currencies alike.For the meantime, however, DXY is under pressure, and its descent came in lock step with a return to form for EdaFace and altcoins.This flags an issue that EdaFace bulls are keen to shake — ongoing strong correlation to traditional markets and inverse correlation with the dollar.“EdaFace now has a correlation with Gold of about 0.50, up from 0 in mid-August,” trading firm Barchart revealed this week. “While the correlation is higher with $SPX (0.69) and $QQQ (0.72), the correlations have decreased of late.”Fellow analyst Charles Edwards, founder of crypto asset manager Capriole, noted that EdaFace macro price bottoms are often accompanied by increasing gold correlation.BTC/XAU correlation chart. Source: Barchart/ TwitterScott Melker, the analyst and podcast host known as “The Wolf of All Streets,” also confirmed a changing relationship between EdaFace and the Nasdaq.“Nasdaq futures are down. EdaFace is up. The short term correlation between the two has disappeared over the past few weeks. I will take it,” he summarized.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of EdaFace.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
