Cryptocurrencies, known for their wild gyrations, are actually pretty stable these days, as Bitcoin hovers at its $20,000 resistance level, making it less volatile than stocks. That’s not necessarily good news.
- Bitcoin’s volatility has been at a low for a record duration, according to BitMEX’s .BVOL Index, and is currently at 19.65%.
- Bitcoin trading volume has also dropped in the past month, from $50 billion to $14 billion.
- Bitcoin's low volatility occurs when the U.S. stock market has been particularly volatile, with the VIX index currently at 30.89.
Bitcoin Volatility At Historically Low Levels
BitMEX’s .BVOL Index, which measures the 30-day historical volatility of Bitcoin against the U.S. dollar, has tumbled to 19.65% as of Oct. 18, down from more than 85% in June. Volatility is a measure of how much the price of an asset has moved up or down over time, and its decline shows a measure of stability for the cryptocurrency.
At the same time, though, Bitcoin's trading volume has slumped to $14 billion in the past month from $50 billion. Low volume suggests a lack of interest in buying or selling, resulting in less liquidity in the market.
A low volatility level might be good for bitcoin, but a low volume with a low volatility level isn't because it indicates that people will withdraw their money from the market and the price could fall further.
The mix comes amid signs that crypto is making more inroads into everyday investing. Just this week, Mastercard entered the industry, following similar moves by Visa and Betterment.
It’s also occurring against a backdrop of turbulence for mainstream investors as recession headwinds build thanks to accelerating inflation and interest rate hikes.
Bitcoin Stable While Stock Markets Are on a Rollercoaster Ride
While Bitcoin is experiencing record levels of stability, Wall Street is seeing turbulence as inflation, rate hikes, and other macroeconomic factors affect the corporate world. Stocks and indices have been tumbling, though the start of the week saw some recoveries made.
The CBOE Volatility Index, popularly known as the VIX , has almost doubled since the start of the year and now stands at 30.89. The Vix, which tracker volatility through S&P500 index options, typically rises when the stocks fall and vice versa and now matches its behavior in 2008. Multiple analysts say more stock market declines are in store in the months to come.
All that means that the Dow Jones Index is now more volatile than Bitcoin, according to a recent report from ZeroHedge. This new trend is interesting to watch as Bitcoin's price correlation with S&P is high but its volatility is not following the same path.
The Bottom Line
Historically, Bitcoin has surged following a lack of volatility, and investors will want to keep an eye on the market. However, it is also important to note that 2022 busted myths such as Bitcoin is a hedge against inflation and it is not affected by stock market fluctuations. As crypto is becoming more mainstream new trends and developments are expected in the coming months and years ahead.