Cryptocurrencies are losing one of the main attractions that has made them so alluring since the birth of the digital-asset market more than a decade ago: Volatility in token prices.
A measure of volatility that looks at the past 180 days is at multi-year lows for market leaders Bitcoin and Ether, according to data from Kaiko. It has only been lower on a few occasions since 2012, said Dessislava Ianeva, senior research analyst at the firm.
“One explanation for the subdued volatility could be low market participation and absence of new capital flows,” she said. “The market lacks a clear catalyst such as a positive spot ETF ruling, which could attract more new traders and boost prices.”
Bitcoin volatility has dropped off even as trading volumes have declined in recent weeks. July saw the lowest monthly trade volume for Bitcoin since November 2020, according to data from K33. Ianeva says lower trading volumes and liquidity would usually mean that price swings impact the market more, making the current environment “quite unusual.”
K33 also points out that Bitcoin’s 30-day volatility is sitting near five-year lows at levels only seen on eight occasions since January 2019.
“This is very typical activity in bear-markets,” Stephane Ouellette, chief executive of FRNT Financial Inc, an institutional platform focused on digital assets, said of the lower volatility. “It’s part of the recovery process — very often see periods of low activity where BTC can, for example, see lower realized volatility levels than major macro indices like the SPX.”
Read more: Bitcoin Turns Less Volatile Than S&P 500, Tech Stocks and Gold
The largest digital coin, at around $29,000, is hovering near the bottom of a new range it carved out following excitement over BlackRock Inc.’s application to issue the first-ever spot-Bitcoin ETF in the US. A spot Bitcoin ETF — which still isn’t available in the US — is viewed by many as potentially being a game changer because it would offer retail investors easy access to trading the token.
Since the initial fervor, prices have declined as commotion, among other reasons, over such a product — which other ETF issuers are also trying for — has faded. Year-to-date, Bitcoin has rebounded some 73% after starting the year at around $16,500, though it had reached above $31,000 at one point.
“Current holders of crypto, particularly Bitcoin and Ethereum, are longer-term holders,” said Sylvia Jablonski, co-founder and chief investment officer at Defiance ETFs. “There has been more stability in the asset class post various implosions, and a sense of no news is good news. What might make this dynamic shift or change is the approval of a spot product, which might allow institutional investors to have an arguably most efficient trading vehicle to gain access.”
Read more: Bitcoin ETF Hype Threatens Another Sell-the-News Fizzle