Bitcoin (BTC) Too Volatile for Its Own Good; Volatility May Hurt ETF Efforts

Derivative products based on Bitcoin (BTC) have to solve the issue of excessive volatility, where the asset makes most of its gains and losses within weeks or even days.

June was the most successful, but also the most volatile month for Bitcoin (BTC). Despite the heightened interest as the prices showed robust net gains, there are fears that volatility may be bad for BTC, in terms of becoming a mainstream investment product.

Jeff Dorman, investment chief for Arca, commented on the excessive volatility of BTC, where most of the gains and dramatic peaks happened in only 75 days of Bitcoin’s history.

“It’s almost a slam dunk now that an ETF won’t be approved any time soon, as an 81% 14-day levered rally, most of which occurred after US trading hours, is not exactly the formula for successful SEC approval,” commented Dorman.

BTC trading is happening with no real closing time, and some exchanges have been under suspicion for filling up their order books artificially. Bot trading and prices based on stablecoins are seen as having the potential to distort BTC prices.

The call for a Bitcoin ETF arrives at a time when the growth of assets is in question. After a decade of unprecedented quantitative easing, with low-interest rates and active lending, the excessive potential for investments is seeking out assets that promise a store of value and better returns. For that reason, gold has spiked again after a long period of stagnancy, and BTC is also seen as a potential store of value.

“If global markets rally, Bitcoin and the rest of the digital assets space will likely rally too, as there is no better risk/growth asset on the planet right now than digital assets.  But if macro factors continue to deteriorate, Bitcoin may also continue to rally as a global safe haven,” predicted Dorman.

However, BTC has periods of extreme volatility that may cause unexpected results. In the second half of 2019, BTC made most of its gains (as much as 163%). Still, the asset also managed to crash by 30% within days.

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