LMAX Digital volumes have been rocketing higher this week. Total notional volume for Tuesday came in at $909 million, 186% above 30-day average volume. The surge in volume has also been accompanied by a healthy uptick in prices.

Bitcoin volume printed $481 million on Tuesday, 171% above 30-day average volume. Ether volume came in at $378 million, 256% above 30-day average volume.

Looking at average position size over the past 30 days, we’re seeing average bitcoin position size at $5,947 and average position size for ether at 2,598.

Volatility has been absent from the market for much of 2022 and is still trending down at yearly low levels. We’re looking at average daily ranges in bitcoin and ether of $606 and $64 respectively. But there are signs of a volatility surge on the horizon following an intense period of range contraction.

We’ve been warning that the recent intense range contraction in crypto assets was setting the stage for a surge in volatility. The market has been anxiously awaiting this development. And while this development has had an impact on price, it’s probably more significant to see the impact on volume.

Volume in crypto markets has cooled off dramatically in 2022, a lot of this a function of the massive pullback and subsequent consolidation. But volume is an exceptionally important indicator when it comes to assessing the health of a maturing asset class, and so, the recent surge in volume comes as a relief.

The fact that the uptick in volume has also been accompanied by an uptick in price makes things all the more satisfying for the market. Fundamentally, a lot of this has to do with a building pressure for the Fed to reconsider its hawkish stance when it meets next week.

The market has been begging the Fed to pivot on policy, and this has factored into the latest rally in stocks and sell-off in the US Dollar, which in turn has translated to crypto demand.

We’ve also seen more signs of adoption in the crypto space, and more evidence of headway on regulation, which traditional market participants are welcoming, as it will reassure and invite their investment into the space.

From a correlation standpoint, it’s worth noting that while correlations with stocks are still there, we have seen less of this in recent weeks, all while bitcoin correlations with gold have been on the upswing.

At the start of September, the relationship between gold and Bitcoin once again turned positive. And in early October, the correlation reached its highest point in a year.

This is important as it shows there is demand for the asset as a store of value in times of risk off in global markets. We believe this indeed should be the case when considering bitcoin’s properties, and we believe this correlation with gold will become more relevant as we see a further breakdown in correlations with risk assets.

Technically speaking, while this week’s price action has been encouraging for crypto assets, bitcoin remains confined to a very tight consolidation, and remains confined to a downtrend. At a minimum, we need to see bitcoin establish back above the October high ($20,480) to suggest a more legitimate bullish reversal could be in the works.