Bitcoin has been considered highly volatile which has made a lot of critics claim that it could neither be deemed as an investable asset or is it a stable store of value. Over the past two months, Bitcoin has silenced all these critics as the coin has remained fairly stable and its volatility is next to negligible.
Bitcoin more stable than DOW (DJI), NASDAQ-100 (NDX) and S&P 500 (SPX)
In what is a rare, phenomena Bitcoin has shed all its volatility and has stayed stable since September 14, 2018. As most traders debate that the stock market is generally far less volatile, and less risky than the crypto market, but this behavior of bitcoin has put their belief into question
The stability of Bitcoin has been so prominent that it now more stable than most popular indexes from traditional finance sectors. The volatility of the bitcoin price is now nearly as low as shares of tech giant Apple, the world’s biggest company by market capitalization.
The CBOE data published by certain media houses, also showed that bitcoin’s historical volatility has fallen lower than that of well-established publicly traded companies like Amazon, an e-commerce giant, and Netflix.
Bitcoin has been married to volatility ever since the digital currency’s inception in 2009, as bubble-like runs have occurred several times in its nearly 10-year lifespan. The narrative today, though, tells a different story. In just over a month, bitcoin’s price has moved only 0.45%. Meanwhile, the DOW (DJI), NASDAQ-100 (NDX) and S&P 500 (SPX) indexes have each fallen 3.62%, 5.60%, and 7.36% respectively.
Although low volatility represents a challenge for active traders, long-term holders and bitcoin enthusiasts see it as a positive development for the digital asset, bringing it closer to the vision of it becoming “digital gold.”
Kevin Davitt, a senior instructor for the Options Institute at CBOE was quoted by MarketWatch
“Perhaps we are witnessing the maturation of a market. It’s far too early to declare this the ‘new normal’ but the persistent range over the last few weeks may be hinting at a structural shift,”
Other experts have also suggested that the recently low volatility of the bitcoin market could be a sign that the market is maturing. Earlier this month, Gil Luria, research director at wealth management firm D.A. Davidson & Co., hinted that there is less speculation in the bitcoin economy today.
“When speculators are involved, they drive unusually high volumes as well as volatility by trading the asset with high frequency. As speculator involvement is diminished, volumes go down and volatility goes down as well,” Luria said at the time.
Will the global equities are in meltdown, Bitcoin’s stability also proves the theory wrong that stated the digital currency’s price movements may be correlated to movements in the traditional financial sector?
While Bitcoin, with is stability is getting closer to actually being termed as digital gold. This is a significant positive sign for a wider adaption of bitcoin.
What are your views on this Bitcoin stability? Do let us know your views on the same.
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Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.