Bitcoin volatility is expected to remain high in the near term and prices could fall further, as crypto markets grapple with tight liquidity and deeply fractured sentiment, according to Fabian Dori, chief investment officer of Sygnum Bank.
But the longer-term picture, he says, remains intact.
“We can see volatility remaining high in the near term, and prices could even decline from here,” Dori told CoinDesk in an interview. “Sentiment has collapsed. Confidence in investors to increase their exposure is very limited.”
The recent divergence between gold, which has held strong, and innovative assets such as Nasdaq tech stocks and bitcoin highlights how fragile the current environment has become. Still, Dori cautions against looking for just one explanation.
“There is no single cause, indicator or driver behind this gap,” he said. “It’s a certain number of elements that have been built in recent months.”
Crypto markets have been trending downward in recent months, with Bitcoin and other major tokens retreating from previous highs as macroeconomic headwinds and uneven institutional flows weigh on sentiment. Persistent inflation and shifting expectations for Federal Reserve rate cuts have dampened risk appetite, while periodic geopolitical surges have reinforced a broader shift away from speculative assets. At the same time, more volatile exchange-traded fund (ETF) flows, diminishing liquidity and bouts of leveraged liquidations have amplified downward moves, leaving prices struggling to regain momentum and repeatedly testing key support levels.
Thin ice
According to Dori, crypto has been “on ice” for some time.
Long-term holders are wary of Bitcoin’s four-year cycle and the risk of entering a correction phase. This caution has left the ecosystem on more fractured footing, with fewer strong hands ready to absorb volatility.
Above that are cryptocurrency-specific liquidity stresses and broader macroeconomic pressures.
Since June of last year, the issuance of bills and notes by the U.S. Treasury has significantly increased balances in the Federal Reserve’s Treasury General Account (TGA). When these bonds are issued, liquidity is effectively withdrawn from the markets and remains unused.
“These are non-productive assets,” Dori said. “And crypto, being one of the most liquidity-sensitive asset classes, has been among the hardest hit.”
A record liquidity event on October 10 further dampened the risk appetite of investors and market makers, he said, accelerating the deterioration of crypto market depth. Funding rates have collapsed and liquidity conditions have deteriorated.
At the same time, concerns ranging from talk about Bitcoin’s store of value to risks related to quantum computing, forced selling of reserves by digital asset hoarders and delays in US legislation, including the much-anticipated Clarity Act, have added to uncertainty.
With sentiment already fragile, even minor headlines now trigger outsized price swings.
“The ecosystem was already on thin ice due to the dynamics of the cycles,” Dori said. Then you add additional liquidity constraints and a sense of collapse, which is a very vulnerable setup, he added.
Since the beginning of October, bitcoin has suffered declines of around 40-50% from its recent highs. The last time markets saw declines of this magnitude was during the systemic crisis of 2022, sparking new fears of broader structural risk.
Dori rejects the comparison.
“From a macro perspective, regulatory clarity, institutional adoption and strength of counterparties, the current situation is totally different from 2022,” he said. “It’s not the same systemic risk environment. »
Liquidity turning point?
According to Dori, the current weakness reflects a short-term liquidity crunch rather than a change in fundamentals.
Market data, he said, shows empirical signs of improvement beneath the surface.
The American economic cycle is widening. ISM services activity has grown in recent months and manufacturing sector figures have surprised on the upside, historically prerequisites for improving risk appetite.
At the same time, headline inflation remains above the Federal Reserve’s 2% target, but is far from the levels that previously fueled serious concerns about trade policy or tariffs. According to Dori, the trend appears moderate enough to allow the Fed to continue its rate-cutting cycle in the coming months.
“This would again improve liquidity conditions,” he said.
Liquidity pressures owed to the Treasury could also ease, paving the way for a faster-than-expected turnaround before the next meeting of the Federal Open Market Committee, Dori added.
From a crypto-native perspective, the fundamental context remains constructive. Stablecoin growth continues, integration into traditional finance is expanding, and the number of native tokens locked on networks such as Ethereum and Solana remains robust.
Institutional adoption, although uneven, continues to increase.
“Once sentiment normalizes and liquidity conditions improve, the gap between traditional assets and crypto is expected to narrow again,” Dori said.
Looking for a trigger
But for now, it’s the feeling that dominates.
Fear and greed indicators are at extreme fear levels, highlighting the lack of appetite to replenish exposure. “This clearly indicates that trust is very limited,” Dori said. “We need some sort of trigger.”
What that catalyst might be is less clear.
Passing comprehensive U.S. crypto legislation, such as the Clarity Act, would be “an extremely positive development,” he said. A normalization of geopolitical tensions could also help restore investor appetite.
Elevating concerns around artificial intelligence and sustainability narratives could provide additional tailwinds. At the same time, a further improvement in liquidity conditions, combined with continued institutional inflows, would strengthen these constructive arguments.
Until then, the markets remain exposed.
The short-term view, because of sentiment, is not great, Dori said. But he remains convinced that the structural foundations are stronger than they appear.
“Basically, we are seeing improving business cycle data, stable coin growth, institutional participation, and stronger counterparty risk management,” he said. “It’s very different from what we saw in 2022.”
According to Dori, the current bitcoin crisis is less a verdict on its long-term viability and more a function of liquidity mechanisms and shaken confidence.
Volatility can intensify before it subsides. Prices could even see lower levels. Still, if liquidity conditions ease and macroeconomic data continues to strengthen, Dori believes the turning point could come sooner than expected.
For now, crypto remains at the forefront. But beneath the surface, he says, the fundamentals are quietly improving.
Learn more: Bitcoin is stuck in a rut, but JPMorgan says new legislation could be the ultimate spark
