Remember the days, in 2017, when Bitcoin was rising by $1,000 increments almost everyday towards $20,000? Such volatility was not even heard of in any asset form, class or commodity. Bitcoin was breaking records and gaining a lot of attention.
Or, Remember when Bitcoin’s price was slashed by 50 percent in March this year as the Covid-19 induced panic affected markets across the world? Bitcoin’s volatility is the double-edged sword that can go up and down, but volatility is volatility and most of Bitcoin’s traditional fame has come from that.
However, since June, and still into July, the volatility of Bitcoin has all but disappeared. The price of the coin has been range-bound in a few hundred dollars. It is struggling to get higher than $9,300 and has a stable floor of just above $9,000. This has made Bitcoin a totally different beast.
The coin was renowned for high volatility as this is something that made it so attractive to traders as they had the option to both long and short it. So, it was not even the growing price of Bitcoin that was so appealing, it was the fact that in a day the coin could rise by 40 percent, or drop by 40 percent, without much of a push.
But, volatility has also been a problem for Bitcoin in some circles as it was intended to be a currency, but to be a currency the asset cannot shift in price so rapidly or it does not encourage spending. Bitcoin began life as a digital cash system, but soon moved away from that.
So, as it stands today, is the cryptocurrency space happy with a stable value, or are they missing the volatility? It is a hard question because it is all part of the evolution and this might be a good move in a new direction.
Traders get bored
As mentioned, volatility is most prized by derivatives traders as they are unphased by which way the market is moving, they are happy with volatility. Thus, in the current situation, there is very little to get excited about, and this is being reflected to.
Crypto derivatives exchanges experienced a 35.7% drop in volume to $393 billion, the lowest monthly volumes since the start of 2020 at the beginning of July. To this end, realized volatility — which refers to volatility as defined by various timespans — is also low and low volatility tends to concern traders and analysts, particularly over extended periods, as a kickback is all too often triggered afterward.
Earlier this month, 10-day realized volatility hit 20%, its lowest since the period immediately before BTC/USD crashed to $3,100 in December 2018.
These volatility levels of course make it less enticing for Bitcoin derivatives traders, but interestingly, it has seen a push for altcoins and there is talk of an altcoin season brewing.
Traders may well be leaving Bitocin behind for the moment, searching for riskier, and more volatile prices, that has seen more money pour into altcoins. But even this altcoin season has been different as rather than smaller no-name projects, there has been focus on those that have been building.
A new opportunity?
When Bitcoin was volatile, there were many naysayers who were quick to call Bitcoin too volatile to be anything more than a speculative investment. The coin has certainly gone down the road of being an investment, but this period opens up a chance to prove its value in other areas.
However, it is unlikely to be tested fully unless this low level of volatility becomes the norm. If Bitcoin can hold onto a steady price, there may be more building back towards making this a viable currency
Bitcoin continues to try and find its place in the new financial revolution, and with the global pandemic also being cause for a change in a number of different sectors, there are places looking for disruptive tech. Bitcoin can cover the financial space, but it’s blockchain tech can also be a bridge to a new way of doing things.