With no major fluctuations in recent months, Bitcoin is becoming less volatile than stocks. In 2020, for example, a VanEck study found that BTC was less volatile than 112 of the 500 stocks in the S&P 500 index over a 90-day period, as well as 145 of these stocks on an annual basis. However, in recent days, even the biggest stocks on the planet are more volatile than Bitcoin. As highlighted by Zero Hedge, the fault lies with the US Federal Reserve.
“The Fed finally did it, they broke the market: The Dow Jones (index with the 30 largest industrial stocks on the planet) is officially more volatile than bitcoin.”
The Fed finally did it, they broke the market: the dow jones (30 largest industrial stocks on planet earth) is officially more volatile than bitcoin pic.twitter.com/BfveiMYZy2
— zerohedge (@zerohedge) October 7, 2022
The good news is that Bitcoin may be becoming a unit of account — one of the three pillars, alongside a store of value and a means of purchase, that define a currency. After all, its high volatility has always fueled famous critics like Nassim Taleb. However, not everyone wants to see Bitcoin almost static, especially for investors. Even so, this may be an effect of the entry of more and more institutional giants in recent years, transforming the way it is seen and negotiated.
Low Bitcoin volatility is a warning sign, experts point out
Another portal that highlighted the game changer between Bitcoin and the equity market was Bloomberg. As a highlight, all guests were concerned about the stability of the largest cryptocurrency, especially as we are in a major downturn.
“Low volatility in Bitcoin may not necessarily be a good thing, especially if it is in low volume.”
The above speech by Yassine Elmandjra of ARK Investment notes that the volume of BTC has dropped along with its price since the beginning of the year. Going further, he points out that the same occurred in 2018, before bitcoin plummeted from $6,000 to $3,000. Steven McClurg of Valkyrie Investments is another who shares the same fears.
“In a general bear market, you don’t want low volatility associated with low volume because we are already in a recession period, we believe it could get worse and the Fed will continue to raise rates and people can start taking money off the table.”Steven McClurg told Bloomberg.
“And when there is low volume and low volatility, it will cause prices to fall faster, which can cause greater volatility.”
Finally, everyone is keeping an eye on US inflation data and how much and for how long the Fed will raise interest rates. Regarding BTC’s low volatility relative to stocks, it can be good as long as it’s not a trap.
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