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Bitcoin has many attributes. Loud, deceptive, baffling, and even phony. But it was never boring.
However, it has been frighteningly subdued recently.
The king of volatility has been dealing with conditions uncharacteristically for days at around $20,000 and hasn’t ventured much since June.
This is causing problems for traders and exchanges that are taking advantage of the wild bitcoin prices, and it opens the door for rival ether that is preparing to advance the crypto game by moving to a more agile and resilient blockchain.
“Bitcoin is not dead, it is boring at the moment, so traders are really looking for alternatives,” said Martin Lennweber, digital asset product strategist at Market Vector.
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According to data firm Coinglass: Bitcoin’s 30-day average volatility — a measure of how its price varies over a given time period — has fallen to 2.7% from more than 4% in early July.
That number held steady at less than 5% in 2022, even in the most turbulent month of the “crypto winter” of price drops, a departure from the past five years when periods of low volatility were followed by spikes of up to 7%.
Likewise, the index from CryptoCompare, which uses bitcoin futures to determine the expected range of price change, stands at just over 77, down from above 90 at the start of the year.
Bitcoin has experienced periods of low volatility in the past, often during periods of low or low prices, with its price fluctuations often returning with higher trading activity.
However, this stagnation may be different.
“This has been a relatively long period of low volatility, it has now surpassed anything we saw even in 2019 as these levels lasted from a quarter to a quarter and a half,” said Stephane Oelette, CEO of crypto derivatives provider FRNT Financial. .
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increase ether speed
Market Vector’s Linweber cited a slight increase in Ether and its derivatives trading as a side effect of Bitcoin’s weak volatility.
In fact, the price of Ether – the No. 2 cryptocurrency with a market capitalization of around $190 billion versus Bitcoin’s $380 billion – has increased by 50% since the beginning of July while Bitcoin has held steady.
Ether does not offer more dramatic prices; It is much less volatile, having had a high of just over 2% in March 2020 during the market’s worst rout due to Covid, according to data firm Messari.
However, it is absorbing a lot of crypto hype at the moment as it stands on the verge of “consolidation”, which is finally expected to happen later this month, when it undergoes a radical transformation to a system in which new Ether tokens are created that become much less energy-intensive.
The burning of cryptocurrencies
For long-term investors in traditional assets such as stocks or bonds, limited volatility in prices may seem like a positive thing. But for many investors and major companies in the bitcoin and cryptocurrency economy, this is not the case. Exchanges, for example, make money by charging fees for trades; When volatility decreases, trading activity tends to evaporate.
For crypto hedge funds, which tend to trade on price swings, fixed values also provide diminishing opportunities for profit.
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So what is behind Bitcoin’s low volatility?
First, the investor journey from the broader cryptocurrency space, which means that fewer people are willing to trade their coins.
Cryptocurrencies have had a rough year as investors dump risky assets across the board in the face of rising inflation, with bitcoin down nearly 60% and ether down 55%. Big explosions in two major currencies and the bankruptcy of a famous lender have also eroded confidence in the sector.
The dollar value of bitcoin trading volumes on major exchanges over a 7-day period also fluctuated between $127 million and $142 million, according to Blockchain.com data, the lowest since October 2020. Similarly, trading in bitcoin futures is at its lowest. and levels since November 2020, data from Block showed.
“The highest levels of volatility usually coincide with the highest levels of interest in cryptocurrencies,” Owlette said. and “People are losing and saying ‘I don’t really care about cryptocurrency right now’.”
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