What a Less Volatile Bitcoin Means for The Crypto Market
Bitcoin's volatility seems to be heading to an all-time low, marking a possible new trend that could affect cryptocurrency markets for its duration.
It’s not every day that one could say that Bitcoin is a stable currency, but that is what’s been happening for a while now. For the last two months of trading, Bitcoin has stayed within $400 of its price after its fall from a bull run on September 3.
Looking at a one-year history of how Bitcoin has performed paints an even clearer picture of this stability.
That said, this is perhaps the longest period we’ve seen so far in which Bitcoin stayed within reasonable limits, even surpassing NASDAQ in terms of stability. Although Bitcoin is no stranger to periods of stability, this is by far the longest and most stable of them all.
The last time Bitcoin experienced a bout of stability was in March 2017, with a 60-day volatility index of 2.43%. Today, that index is at 1.55%, smashing prior results.
The last 30 days have been even more stable, with Bitcoin staying within 1.12% of its average price.
What does this mean?
A stable market means that fewer high-rolling day traders will be interested in participating in it. People hoping to make short-term gains would have to either switch to a tactic that favors delayed gratification or seek greener pastures elsewhere.
Other cryptocurrency markets such as Ethereum (5.26% 30-day volatility index) have plenty of room for riskier gamblers. For the meantime, Bitcoin is starting the unusual pattern of looking like a stable currency.
In the long term, however, it’s hard to entertain the notion that things will remain this way. Bitcoin has a tendency to break away from spells of stability and go back to swinging back and forth in its value.
Only time will tell whether it will happen this time or not, but if history shows us anything, it’s that BTC charts will be collecting more hockey sticks any day now. A market like this, with trading volumes below the trillion-dollar benchmark, doesn’t resist a status quo of intense spikes and troughs.
Due to this tendency, unless Bitcoin remains the way it currently is for a far longer period, it will not reach the status of a stable asset like gold bullion.
If some odd force of nature somehow continues to dampen the cryptocurrency’s price volatility, we can only surmise that many traders and investors would stop feeling the need to use other more stable coins as a hedge. This would grow Bitcoin’s market capitalization, which would only be boosted by its attractiveness to more long-term buyers looking for safe havens against other markets.
The possibility of a scenario like this one is incredibly remote, as this doesn’t align with historical data. A wise investor would presume that things will go back to a status quo any day now, perhaps even if and when an ETF would come online in the near future.