Bitcoin volatility has traditionally been a deterrent to institutional investors and adoption as peer-to-peer money. While it has been rallying this year, it has not had the wild volatile swings seen in previous bull runs — and this could improve its investment appeal.
Bitcoin is holding onto gains as we head into a new week. Since returning above five figures on Tuesday, BTC has pulled back slightly from a new 2020 high on Feb. 13.
Today prices are hovering slightly below $10,000 as BTC finds a new consolidation zone.
Bitcoin Volatility Falling
Cryptocurrency investor and researcher ‘Ceteris Paribus’ (@ceterispar1bus) has been delving into maximum intraday movements for Bitcoin, Ethereum and Tezos. Taking an average of these over time can help determine whether BTC’s volatility is rising or falling.
The findings indicate that the difference between Bitcoin’s daily highs and lows is around four percent, while Ethereum stays at six percent and Tezos at nine percent.
YTD max daily intraday moves for BTC/ETH/XTZ
i.e. the difference between bitcoin's high and low every day averages ~4%. It averages ~6.1% for eth and 9.1% for tezos. pic.twitter.com/x0BYwLaWWk
— Ceteris Paribus (@ceterispar1bus) February 15, 2020
He added that this is good when we are in a bull run but can quickly destroy value if market sentiment shifts.
A chart from Coinmetrics indicates that BTC volatility is currently at its lowest levels since November 2018. This is a good sign, especially when considering that the asset has gained 43% so far this year.
Volatility and wild price swings are off-putting to traditional investors who often seek more stability in their chosen assets. Gold, for example, is extremely stable with very small price swings. It has also had a solid year gaining 4.2% as it reaches a seven-year high.
Ethereum prices have been pretty flat for a bit until they took off earlier this month. ETH is slightly more volatile than Bitcoin at the moment, but volatility levels have fallen for this asset as well.
As Ethereum cements itself as the foundation for a decentralized financial landscape, it too will become more attractive to institutional investors. The amount of ETH locked away as collateral for DeFi has increased by almost 50% since the same time last year.
This adds to demand and should, in theory, help to reduce its volatility as more of it gets used to fuel crypto-lending and borrowing markets.
Both digital assets have started this year with a bang, and their price movements are still intrinsically woven together, though the store-of-value narrative for the pair is definitely strengthening.