One of the biggest arguments about Bitcoin is that it is volatile. Its price swings make it impractical to be used for daily transactions. From $1,000 during the start of 2017, it was able to reach near $20,000 by mid-December.
Bitcoin is currently trading around $6,200 to $6,500 which is quite far from its all-time high. However, there is something that is quite different in its behavior. These days, Bitcoin has become more stable. Nearing its 10-year anniversary, Bitcoin has been quite stable. In comparison to assets such as the stocks of Amazon, Netflix, and NVDA, all of these assets have been more volatile than the cryptocurrency.
Maturity in the Market
According to CBOE Global Market, Bitcoin’s 20-day historical volatility is currently at 31.4%. It is nearing the likes of Apple that has a historical volatility value of 29.3%. If you will look at its current volatility at 31.5%, it is a far cry from the historical volatility of Bitcoin when it was able to reach near $20,000 that had a value of 140%.
According to senior instructor at the Options Institute at CBOE, “A one standard deviation move for bitcoin at present is about $475. That works out to +/- 7.3% (475/6500). Compare that to earlier this year (mid-January) when bitcoin was around $11,000. Back then the standard deviation measured $4640 or +/- 42%”.
For Davitt, the lack of drastic price swing in Bitcoin could mean that the crypto market is actually maturing. However, he also admitted that it is “far too early to declare that this is the new normal”. He added that there are preliminary indicators that “may be hinting” that this market is seeing a dramatic shift.
Are Investors Holding On To Their Bitcoin?
Is HODL the name of the game these days? There are many reasons for investors to stick to Bitcoin. For one, Bitcoin has become synonymous to a safe haven cryptocurrency. Despite the volatility seen in altcoins, even seeing Ethereum and Ripple switch places in two occasions, Bitcoin remained somewhat stable.
Could it be that people are actually waiting for institutional investors to get involved. For instance, you have the possibility of a Bitcoin ETF getting approved by the US Securities and Exchange Commission. Though the Winklevoss led Bitcoin ETF application has been rejected by the agency citing the possibility of price manipulation in the market, the one submitted by VanEck and Solid X seems to have a greater chance of getting approved. In fact, some actually believe that it is inevitable.
Next, you have the likes of Bakkt and Fidelity. With these developments, could it be possible that Bitcoin is going to experience a bull run soon? For a permabull like Tom Lee, he believes that Bitcoin surpassing the all-time high last year is still possible. There is still a chance that Bitcoin could actually reach $25K this year.
It is true that these are all just guesses, the fact remains that Bitcoin is becoming stable. This can still be good news if you will look at it in terms of increasing the adoption of the cryptocurrency.