Bitcoin Volatility Soars After Trump's Bitcoin Reserve and Options Expiration

Bitcoin prices have been on a wild swing between $78,000 and $82,000 as momentum has waned and traders have been dealing with the changing macroeconomic landscape.

After briefly surpassing $90,000 last week, Bitcoin has faced a sharp correction following a "sell the news" reaction to events such as the creation of the US Strategic Bitcoin Reserve and the White House Crypto Summit. These news have sent BTC prices tumbling, erasing previous gains, according to a recent report from Bitfinex Alpha shared by crypto.news.

Market volatility was further fueled by the $3 billion Bitcoin and Ethereum options expiry last Friday. This has led to large price swings, with realized market volatility rising to 80%. Meanwhile, implied volatility surged 35.7% ahead of the summit as traders sought to hedge their positions.

Traders suffered widespread losses, with realized losses totaling $818 million per day, particularly on February 28 and March 4, according to on-chain data. This was one of the largest daily loss events in the current cycle, according to the report.

Bitcoin’s spent output profit ratio (SOPR), a key metric that measures the profit or loss investors make when selling Bitcoin, fell below 1.0 for the first time since October 2024. This typically signals distressed selling. Short-term investors suffered significant losses, with the SOPR at 0.95 – the second-largest negative reading in the current cycle. If the bullish market structure holds, this level could attract new investors, but sustained weakness could signal a continuation of the downtrend.

Macroeconomics and Regulations Affecting the Market

Uncertainty in the global economy has contributed to investor hesitation. The US labor market remains strong with 151,000 new jobs in February, but the unemployment rate rose to 4.1% as the government cut back on jobs. Wage growth continues to hold, but inflationary pressures and trade disruptions pose risks to economic stability. The manufacturing sector, in particular, is facing challenges as new tariffs raise costs and slow the pace of new orders.

Meanwhile, regulatory changes could reshape the crypto landscape. President Donald Trump’s Strategic Bitcoin Reserve now holds 187,000 BTC, or $13 billion, marking a major shift in US policy from selling seized Bitcoin to holding it as a national asset.

In addition, the Trump administration is pushing to pass legislation governing stablecoins in August and end restrictive policies on the crypto industry, such as Operation Choke Point 2.0.

In Japan, crypto-friendly tax reforms are also being introduced, including a 20% tax on capital gains from digital assets and a tax deferral on crypto-to-crypto conversions. These moves could encourage greater investment in the digital asset sector in the near term.