The crypto market is known for its volatility. And though there are regulatory changes happening this year, it is quite clear that there is no single consensus regarding the industry. You have regulators that have a somewhat open-minded approach to cryptos while there are others that are critical to cryptocurrencies and even its underlying blockchain technology.
A Maturing Market or a Risky Investment?
In fact, Nouriel Roubini who predicted the 2008 financial crisis is now calling crypto a “stinking cesspool”. In addition to this, even the International Monetary Fund (IMF) has recently released its warning regarding the fast-rising crypto market.
However, it has been noted that Bitcoin’s volatility has mellowed down in recent months. There are many possible reasons regarding this scenario. There are those who believe that it could be a sign of a maturing market while others think that it’s probably a sign of price manipulation waning.
According to an interdisciplinary Journal of Nonlinear Science, it is suggested that digital assets are more reliable than what previously thought. The report was entitled “Bitcoin market route to maturity? Evidence from return fluctuations, temporal correlations, and multiscaling effects”. The researchers explained that there are some trends that are present in Bitcoin that can also be seen in physical currencies.
While analyzing the data, the authors mentioned that “Initially, the graphs we got were a bit crooked, which did not augur anything promising”. The author also added that “But when we took a closer look at the data, suddenly it turned out that this crookedness originated from the first two years of the analysed period, that is, from the time when the market was just starting to shape itself”.
The report mentioned that “later on, the rates of return fluctuated according to the inverse cubic law”. The cubic law has been used in order to judge the maturity of a particular market.
Did The Market Mature?
Now, did the market really mature? When the researchers turned the plot price changes in one-minute sequences, they discovered that between 2012 and 2018, it has been quite obvious how the market matured in recent years. They pointed out that Bitcoin maturing was “particularly evident in the last six months of the examined period”.
Now, will this please investors? A lot of people today are still waiting for the influx of institutional investors to get involved in the niche. Though there are players such as ICE and Goldman Sachs that has been involved in cryptocurrencies, many believe that institutional investors can play a major role in another bull run.
The report mentioned that the fluctuations in rates of return experienced by Bitcoin were similar as “regular, mature markets, such as the stock, dollar, oil, or bond markets”.
Now, if you are going to base your judgment on this report, this means that Bitcoin is a good long-term investment. Though Treasury Committee Chair Nicky Morgan has labeled cryptocurrency investment as a “wild west” industry, it seems that with regulatory changes that happened this year, the market is slowly making a positive change. It might even become a reality that a Bitcoin ETF is going to be approved soon.