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The volatility of Bitcoin has hit a level not seen for some time. Usually, this is preceded by major price moves.
Bitcoin has always been notoriously volatile and has gained a reputation for being so. However, it is slowly losing this aspect and is now less volatile than many stocks. This includes 33 current S&P 500 stocks, and up to 2023, was less volatile than 92 S&P 500 stocks. Some of these stocks were extremely prominent and well-respected safe havens. With even less volatility over the last two months, could this signal a bull run upwards or be a harbinger of bearish downward trends?
The Bitcoin price today shows that, compared to the last week, Bitcoin has remained fairly stable. Currently trading at $113,065 as of Wednesday, the 24th of September, it managed to weather a period where the crypto market went through a relative boom and subsequent dip.
Last week was possibly the most volatile period cryptocurrency has had in some time. Binance noted that the Fed’s 25bps cut pushed the total crypto market cap to US$4.1T, with BTC surpassing US$117,000 and BNB breaking above US$1,000 for the first time. Altcoins broadly outperformed, signalling renewed risk appetite. They also noted that nearly every altcoin sector outpaced BTC’s 1.5% weekly gain. Thus, as crypto shot up in price, Bitcoin stayed relatively level.
Bitcoin's volatility has only been at this stage twice before. The first of these periods was in 2017, and the second was between 2020 and 2021. Both were near huge price shifts: The first occurred before the move to $20,000, and the second to over $70,000 after the launch of ETF products in the US.
The lack of volatility can also be seen in Bitcoin's latest reaction, or lack of reaction, to Fed rate cuts. Many had expected these to have a huge impact on Bitcoin and its price.
The Market Value to Realized Value of Bitcoin is currently at around 2.1, which is considered quite average. This is quite an indifferent position, with investors not forecasting major losses or growth. This suggests that rather than predict price changes, what Bitcoin may be doing for the foreseeable future is staying exactly where it is.
This is backed up by the lack of Bitcoin available on retail exchanges. This is usually a prelude to a supply shortage, which many believe is taking place now. It also signals a weakening of selling pressure.
Deutsche Bank believes this volatility will only lessen as more institutional investment takes place. In a research note published on Monday, the 22nd, they likened it to the arc of gold adoption. They added that "History appears to be repeating itself. Like Bitcoin, gold was once subject to skepticism, suspicion, and demand speculation."
Clearer regulations may indeed have contributed to the lowering volatility of Bitcoin. The introduction of regulations in the US, like the GENIUS Act and the introduction of strategic reserves, has seen to this. They cited August as a perfect example, when the price of Bitcoin hit a record high as its volatility reached record lows.
It is also worth taking note of the impact of seasonal trends on Bitcoin. September is typically a month when the whole cryptocurrency market faces a loss. Any positive September months have generally been followed by a strong final quarter. This was the case last year, and the market bounced almost 50% in the two months that followed.
There are several reasons why Bitcoin has been volatile in the past, along with other cryptocurrencies. The biggest reason is supply and demand. As a speculative asset, its coins are dictated by how many are in circulation and how many people are willing to pay for them. At the moment, there are not that many coins in circulation. Many have been eaten up by institutional investment and corporate treasuries.
The actions of investors also have a bearing on the Bitcoin market. Yet over the last few months, there have been several large whales who have turned Bitcoin into Ethereum. Some of them may have been astute in doing this. Binance noted that sector-level returns were strong last week, with Gaming, Layer 2, and Memecoins each rising over 7%. However, these whale sell-offs and the switch to altcoins did little to dent the price of Bitcoin.
While Bitcoin is currently fairly stable, this is no guarantee that volatility will not return. Major whale liquidations and a reversal in institutional adoption could see to this. Yet if these continue, it seems that Bitcoin may actually be on a similar trajectory to gold. This means it may actually be on the path to becoming a safe haven asset where volatility is a thing of the past.
Disclaimer
The information on Coinsniper is user-generated and not verified. Coinsniper does not provide financial advice or facilitate transactions.
Also note that the cryptocurrencies listed on this website could potentially be scams, i.e. designed to induce you to invest financial resources that may be lost forever and not be recoverable once investments are made. You are responsible for conducting your own research (DYOR) before making any investments.
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