Amid the economic chaos, Bitcoin (BTC) is holding relatively steady. For now, the cryptocurrency remains in the region between $18,000 and $20,000. And because of that, BTC volatility has once again fallen below the volatility of the S&P 500. According to cryptocurrency analysis firm Kaiko, the relationship is measured by Bitcoin’s 20-day volatility, a metric that measures daily changes in the price of Bitcoin. BTC price. The BTC volatility index has dropped far below the Nasdaq 100 and also the S&P 500. As a result, BTC is seeing less volatility than the US stock market for the first time in two years. The last time this happened was in the last quarter of 2020, just before BTC broke the $20,000 barrier again.
Bitcoin, Nasdaq and S&P 500 volatility. Source: Kaiko. In other words, the price of BTC has fluctuated less in the last three weeks. This, in turn, has made the cryptocurrency less unstable, despite the global scenario still being challenging. Just before the 20-day period in question, volatility in the cryptocurrency and equity markets hit a 40-year high.
External data still a concern
This Friday (21), the market estimated that inflation rates should remain high in the US. The data indicate that the rise in prices should continue throughout 2023, although the Federal Reserve (Fed) continues to raise interest rates. As a result, many economists expect the US interest rate to rise. The Fed has already raised rates by 0.75% three times this year, the first of which was the sharpest since 1994. And the trend is for a further 0.75% increase at the next meeting, between the 1st and November 2nd. Kaiko also says that the gap between the 30-day and 90-day volatility readings for BTC and equities has been narrowing since the second half of September. Both the Nasdaq 100 and the S&P 500 are down around 10% since the start of that month, but BTC is down less than 5% over the same period. This is the first time since October 2020 that Bitcoin is less volatile than Nasdaq. It is also the first time since August 2020 that the world’s largest cryptocurrency is more stable than the S&P 500.
understand the numbers
Kaiko’s research director Clara Medalie said that “BTC volatility has been falling since early July,” which is the time when the industry began to take stock of the liquidity crisis that arose after the ecosystem collapsed. Earth. Cryptocurrency trading volumes have remained stable despite low volatility, which suggests that trading activity has remained consistent. On the other hand, equities experienced increases in volatility “due to a number of factors, including high interest rates, dollar appreciation, persistent inflation, energy crisis and war.” Medalie also said that although BTC is far from its maximum price, the cryptocurrency is again acting as a kind of buffer against macroeconomic uncertainties. With high volatility hitting even debt securities, BTC has been one of the few stable assets in recent months. “The divergence in market activity for the two asset classes suggests that cryptocurrencies are more resilient to recent volatility-inducing macro events,” Medalie said. According to IntoTheBlock, BTC’s current correlation coefficient with the Nasdaq and S&P 500 is around 0.3. The closer this value is to zero, the lower the correlation. The closer to 1, the more the markets are correlated.