Bitcoin Volatility to Continue: Why a BTC Price Dip Could Be a Boon for the Crypto Market

Key Insights:

• Bitcoin volatility high as BTC price dips from $111K to $104K.
• Record-high derivatives open interest fuels volatility risk.
• On-chain data shows market euphoria near peak profit levels.
• Past BTC dips often reset leverage and support long-term growth.

Bitcoin volatility has returned after a rally to new highs, as BTC price climbed from around $74,500 in April to an all-time high near $111,900 in May.

That parabolic rally was followed by a sharp pullback, the first meaningful correction since April’s lows. Bitfinex reports this dip comes as “renewed macro pressure” hits markets – a U.S. appeals court move on tariffs sent 30‑year Treasury yields surging over 5%, stoking global risk‑off sentiment.

Over the last weekend of May, for example, U.S. trade‑war headlines triggered a wild swing: Bitcoin briefly plunged below $104,000, wiping out some $600 million in positions, before rebounding to about $105,000 on fresh buying.

This kind of intra‑week Bitcoin volatility has become typical. In short, Bitcoin is volatile again as macro forces and profit‑taking collide, even as the long-term trend remains intact.

Tariff Shocks and U.S. Economic Woes Drive BTC Price and Volatility

Trade tensions and slowing growth are key drivers of the recent weakness. On May 23, 2025 President Trump announced a 50% tariff on EU imports, a shock that rippled through markets.

Bitcoin price fell sharply on that news, mirroring plunges in stocks and other risk assets. Bitfinex highlights that U.S. tariff policies have been fuelling risk‑off sentiment: a court decision to pause tariff cuts sent bond yields higher and shook confidence.

Higher tariffs have also had a trickle‑down effect on the U.S. economy. Consumer spending slowed in April as households grew cautious under looming trade costs, and new orders for core capital goods fell (the steepest drop since October) amid business uncertainty.

Overall, U.S. growth has softened: first‑quarter 2025 GDP actually contracted about 0.3% even as the Fed kept interest rates steady at 4.25–4.50%.

Importantly, Fed officials have warned that tariffs could reignite inflationary pressure after months of easing. In other words, trade‑war jitters and a faltering U.S. economy have set the stage for Bitcoin’s gyrations, with markets scrambling to price in policy responses.

Derivatives Bets and On-Chain Euphoria

At the same time, derivatives markets and on-chain metrics signal a highly speculative environment. Bitfinex notes that Bitcoin options open interest just hit an all-time high of roughly $49.4 billion. This reflects massive institutional hedging and bets around the $110k+ BTC price zone.

Bitcoin futures open interest is also exploding: CoinGlass data shows roughly $72 billion of open futures positions. In practical terms, this means a record number of leveraged contracts are open. When huge positions accrue, any sharp price reversal can trigger forced liquidations and cascading losses.

If BTC moves against those big bets, leveraged traders may be wiped out, adding fuel to volatility. Notably, over $2.7 billion of options contracts were due to expire at the end of May, with the largest cluster of strikes in the $100k–$120k range.

All together, the notional “max pain” level sits near $103k, suggesting significant profit‑taking could hit if Bitcoin slips toward that price.

On-chain indicators tell a similar story of froth. Analytics firm CryptoQuant reports that about 99% of Bitcoin’s supply is in a profit position at current levels.

Such extreme profitability has historically coincided with market euphoria and often precedes corrections. Bitfinex’s own Relative Unrealised Profit metric has jumped well above its +2σ band – another sign that most holders are sitting on gains.

Meanwhile, other signals hint at caution: Glassnode notes that although perpetual funding rates and open interest have climbed (signaling speculative demand), the net spot demand is cooling, indicating early selling pressure.

In sum, both derivatives and on-chain data suggest Bitcoin is overheated in the short run. Traders should brace for more Bitcoin volatility, as leveraged positions unwind and profit‑taking unfolds.

History of Bitcoin’s Volatility with BTC Price

Bitcoin’s current roller-coaster fits a familiar pattern. Crypto markets have often seen huge gains followed by swift retracements.

For example, after reaching a then‑record high near $69,000 in November 2021, Bitcoin plunged roughly 40% to the low $40,000s within days. That crash was the steepest since an earlier 31% drop in May 2021.

These episodes illustrate that steep dips are normal in Bitcoin’s bull runs – they often shake out weak hands and clear the way for longer-term buyers.

In that light, the present pullback can be seen as a healthy reset, not a structural breakdown. As Bitfinex observes, the downturn appears driven by leverage flushing and profit-taking “after one of the sharpest recoveries in crypto history”. In other words, this volatility may simply reflect Bitcoin digesting earlier gains.

Going forward, most analysts expect Bitcoin volatility to stay elevated. Key price zones are in focus: technical charts suggest support near $103,000–$104,000, and resistance around $106,000–$107,000.

A decisive break one way could trigger the next big move. In the near term, with U.S. monetary policy and trade policy in flux, sharp swings are likely. Barron’s recently noted that crypto remains “highly sensitive to macro signals,” meaning that any sign of a more dovish Fed could ignite another leg up in risk assets.

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