It seems the top two horses of the crypto race, Bitcoin and Ethereum, have become less unpredictable than oil. Data provided by the crypto analytics firm Kaiko detected the 90-day volatility of BTC and ETH at 35% and 37% respectively, making these assets less capricious than oil, which boasted a volatility of 41%. Interestingly, the last time we witnessed this kind of waning price momentum in these major crypto assets was back in 2016.
This presents an interesting quandary for investors. On the surface, reduced volatility might seem to be less attractive to speculative traders, who rely on acute fluctuations to make swift gains. However, the decreased price fluctuation is being viewed as bullish by some, suggesting that it might lead to stability and consistent growth.
For instance, analyzing the correlation between Bitcoin’s past performance and its low volatility might shed light on what the market holds for us. Drawing parallels to the 2020 graph, it was noted that Bitcoin experienced a similar period of low price divergence just before it launched into a bull market. However, these observations come with a caveat about possible sideways drift in the current stage.
In past instances, Bitcoin’s price was observed to leap out of the lows post periods of low volatility to form a high, closely followed by the formation of another second high, against the key resistance level. This trend, however, was met with resistance and inertia again leading to a sideway movement.
This draws certain implications for investors – firstly, despite having a period of contracted volatility, they should also be prepared for subsequent large price movements. While fluctuations provide opportunities for gains, investors should be prepared to adapt to prolonged periods of stability.
As for Ethereum, as the second-largest crypto asset, it has also witnessed similar patterns of low volatility but one cannot simply assume that Ethereum will follow the same trajectory as Bitcoin due to their quite differing fundamentals.
In conclusion, while these cryptocurrencies and the oil market have their unique drivers of volatility, the low volatility observed in BTC and ETH does not necessarily mean that they will navigate smoothly in the future or that their prices will only tilt upwards. It is important to consider the external factors such as clearer regulatory frameworks, mainstream adoption, institutional investors’ involvement, and technological developments in blockchain that also play fundamental roles in defining the trajectories for these cryptocurrencies.