Bitcoin BTC -1.69% volatility increased in the first week of October, with analysts forecasting that such conditions could endure for at least the rest of the month.

"Since the beginning of October, bitcoin has been more volatile on average than the past 200 days in the asset’s history," according to Monday's Bitfinex Alpha report.

The report highlighted what it says is a historical trend where major equity indices experience volatility first before it spills over to other risk assets such as bitcoin. Analysts cited the volatility index for the S&P 500, stating it has rebounded from a multi-year low on Sept. 15. 

"Bitcoin and other crypto asset isolated high volatility events are continuing to rise and with historical volatility sustaining above crucial averages, this trend is likely to continue," the report added. One isolated high volatility event cited was on Oct. 2, when historical 24-hour volatility increased by over 340%.

The report added that the bitcoin options market showed implied volatility in October remaining above historical volatility, a rise that is in sync with similar volatility increases in U.S. equities.

"The options market is currently pricing in more volatility for bitcoin as in the past. Implied volatility currently stands at 37.8%, while historical volatility is at 32.4%," Bitfinex analysts added.

Thursday's U.S. CPI reading

CoinShares Ethereum Research Associate Luke Nolan highlighted another factor that could drive volatility in the cryptocurrency market, with this week's U.S. inflation reading as an inflection point for volatility within the bitcoin and wider crypto market.

Nolan stated that Thursday's CPI could come in lower than expected, with a consensus projection at 3.7%, down from a former forecast of 3.8%.

"There are good chances this brings volatility to the market, with an impact on digital assets," Nolan added in CoinShares Crypto Monday update.

However, oil prices have rallied after Hamas' weekend attack in southern Israel, which has seen traders adding a geopolitical risk premium to commodities. The two major crude oil benchmarks were up by nearly 4% in early trading on Monday.

Higher oil prices could act as an obstacle to the Federal Reserve's 2% inflation goal.

Bitcoin's price is being held at a support level above the $27,000 mark by a dynamic between short and long-term holders. According to Bitfinex analysts, BTC short-term holder supply is now down by nearly one million coins since April 13, with long-term holder supply up by over one million BTC in the same period.

The world's largest digital asset by market capitalization changed hands for $27,450 at 1:30 p.m. ET, down 1.6% over the past 24 hours, according to CoinGecko.