Bitcoin volatility has taken a dip setting a downward trend showing off signs of a maturing market. Moreover, according to a recent study, Bitcoin makes for a good diversification factor in a portfolio instead of gold that will be further boosted with institutional interest. Meanwhile, a majority of altcoins are plunging except for a few like VeChain (VET).
Bitcoin price keeping steady despite being in red, altcoins plummet
Bitcoin has been circling $6,500 for the past couple of weeks trying to achieve this level before going on a rally and reaching higher. Though the technical charts have been showing signs of a potential breakout in near future, nothing can be concrete. However, where bitcoin goes, the market follows, so we can expect for good things.
At the time of writing, Bitcoin has been trading at about $6,400 with a slight correction in the past 24 hours. The world’s leading cryptocurrency has been managing the trading volume of about $3.7 billion.
Bitcoin might not be experiencing much change in its price but altcoins are constantly moving up and down, at times in double digits. This has the BTC dominance reaching 53%. Out of the top 15 cryptocurrencies, with 6.29% Dash and 5.57%, EOS are doing the worst, followed by Ethereum (ETH), Neo, and Cardano (ADA).
Overall, Tezos (XTZ) with 12.34% drop, Ontology (ONT) by over 7%, and IOST by about 7% loss are on the downhill.
On a positive note, Kyber Network (KNC) has unmatched gains by 31%, VeChain (VET) by 4.30%, and TenX and Waves are also up by a few percentages.
Also, read: Buckle up, Bitcoin Getting Ready to Crash
Bitcoin volatility dips, add BTC instead of gold in your portfolio
If we take a look at the volatility aspect of the Bitcoin, despite the ongoing market trend it is making significant progress. In the past 14 months, the volatility rate of bitcoin has taken a hit and slid to its lowest. It is actually setting a downward trend for the very first time that shows the sign of a maturing market. But due to declining trading volume, the liquidity has not increased.
Meanwhile, a research from the York University, by replacing gold with bitcoin in a portfolio, one can have higher risk-adjusted returns stating,
“These results are robust to the inclusion of trading costs. We find that it is possible for an investor to substitute bitcoin for gold in an investment portfolio and achieve a higher risk-adjusted return.”
The study further states,
Bitcoin “has a very low correlation with the other assets, indicating the possible use of bitcoin in diversifying risk.”
However, the period covered by the report is from Jan 2011 to October 2017, that doesn’t cover the price skyrocketing in December. However, given the fact that Bitcoin volatility is gradually losing its edge, works in its favor.
The non-correlation of cryptos with other assets makes them extremely useful as a diversification factor in a portfolio. Now, as institutional investors make their way in, Bitcoin and other cryptocurrencies will be starting to be used to create a diversified portfolio in place of gold.