Bitcoin (BTC) has been down roughly 5% over the past 24 hours and remains below the key $100,000 price level — trading at $99,692.42 as of press time.

According to the recent “Bitfinex Alpha” report, BTC price risks consolidation following this correction as volatility drops.

On Jan. 27, fears about declining profitability in artificial intelligence (AI) investments triggered a sell-off in equities, which spilled over into Bitcoin. This event suggests that BTC is currently sensible to bro

Consolidation amid falling volatility

Bitcoin’s implied volatility (IV) has dropped over 13% since its Jan. 20 peak of $109,590, signaling a shift in market sentiment. 

Reduced IV suggests traders perceive lower risk and are bracing for consolidation, with Bitcoin trading in a tighter range. This stabilization follows a surge in net capital inflows after Bitcoin breached the $100,000 mark, though inflows have since tapered off.

Profit-taking activity has also slowed, reducing sell-side pressure and the need for fresh capital to sustain current price levels. 

The market’s realized cap, a measure of the cumulative cost basis of all Bitcoin holders, has reached an all-time high of $832 billion, growing at a steady rate of $38.6 billion per month. This signals a maturing market but also hints at a potential near-term plateau.

Outpaced by the S&P 500

The 30-day rolling Pearson correlation between BTC, the S&P 500, and the NASDAQ is strong, reaching 0.7 out of 0 to 1. As equities rally on favorable macroeconomic developments, Bitcoin has similarly benefited and reached a new all-time high.

However, this correlation also brings Bitcoin down along with other risk assets. While BTC has struggled to sustain a climb above its previous all-time high of $108,100, the S&P 500 has surged to a record high of 6,118.71 points, driven by investor optimism, strong corporate earnings, and policy announcements under the new administration.

The interplay between Bitcoin and traditional equities suggests BTC’s trajectory will remain closely tied to broader macroeconomic trends. While this alignment offers opportunities during market rallies, it also exposes Bitcoin to risks from downturns in equities. 

A shift in risk sentiment, triggered by economic data, geopolitical developments, or regulatory announcements, could quickly alter the trends. Meanwhile, Bitcoin is entering a wait-and-see phase, with traders closely monitoring macroeconomic signals and market catalysts. 

The report noted that whether it can sustain its peak or face further consolidation depends on the trajectory of equities, liquidity conditions, and speculative demand.

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