At first glance, the fact that Bitcoin stock is becoming less volatile than equities may seem like a trend that should be welcomed. Traders of cryptocurrencies, however, are warning that this may not be such a good thing in an environment with little traffic.
Bitcoin Stock Performance
According to Noelle Acheson, author of the “Crypto is Macro Now” newsletter, the coin’s 30-day realized volatility has “fallen dramatically” recently. Noelle Acheson provided this information. According to the data obtained by Acheson from Coin Metrics, it is now somewhere around 52% after spending the previous month at or over 64% on an annualized basis. Meanwhile, Jake Gordon of Bespoke Investment Group refers to a volatility metric known as BitVol that has “begun to break down,” meaning that it has dropped to nearly as low as it has been since the spring. The index has fallen significantly from its high point in May, over 111, and is now hovering just around 69.
However, the amount of trade has also decreased. According to the data tracker CoinMarketCap.com, daily readings are now hovering around $47 billion. This represents a significant decrease from the more than $100 billion recorded at the beginning of the year.
And although decreased volatility is typically greeted with relief in markets like the stock market, for example, the combination could spell trouble for Bitcoin, which tends to have a large number of speculators who enter the space for the sole purpose of experiencing the swings in price.
On Tuesday, an analyst from ARK Investment Management named Yassine Elmandjra was interviewed on Bloomberg TV. He stated that low volatility in Bitcoin stock would not always be a positive thing, especially if it is trading on low volume. Elmandjra used the example of late 2018 to illustrate his point. At the time, Bitcoin stock’s price was around $6,000, and many investors had anticipated that the unduly gloomy mood would lead to a short squeeze. However, the currency “dumped” to $3,000 instead.
“Therefore, although low volatility may indicate that the Bitcoin market is becoming less exciting and more predictable, low volatility on low volume may not benefit the market.”
As a result of the Federal Reserve and other central banks actively raising interest rates to combat inflation, crypto has been hit hard this year. This has significantly shifted from the hype-fueled mania that characterized previous years. Many digital asset investors, particularly those who had only begun investing in the space within the past few years, have been driven away from the industry and daily trading. The absence of retail investors, in particular, has been particularly notable. Meanwhile, institutions have lately emerged as the primary actors, which may explain why the level of volatility has decreased.
Tim Grant, president of EMEA at Galaxy Digital, stated last week on Bloomberg TV that “the macro background is truly influencing us just as it is affecting every other asset class.” Grant’s comments were about the current economic climate. “Retail is no longer an appropriate asset class for this.”
As a result of everything, market observers are now trying to discern indicators that Bitcoin stock and other tokens may be reaching a possible low price. Bitcoin is down sixty percent for the year, and the S&P 500 is roughly twenty-five percent. Despite this, most of the crypto market’s selling activity occurred in the first half of 2022. The flows of exchange-traded funds reflected this: During the third quarter, the rate at which money was pulled out of crypto-related funds slowed, indicating that many adverse investors may have already pulled out of the high-risk asset class.
As of 6:55 a.m. on Thursday in New York, the price of bitcoin stock was down around 2.6% to $18,666. This is the lowest level in approximately two weeks.
The toxic mix of low volatility and low volume raises the possibility that prices may fall more precipitously in the case of a selloff. This is the anxiety that underlies the situation.
“You do not want low volatility coupled with low volume in an overall bear market because we believe it could get worse, and the Fed will continue to raise rates, and people might start taking money off the table,” said Steven McClurg, co-founder, and chief investment officer at digital-asset fund manager Valkyrie Investments. “In an overall bear market, you do not want low volatility coupled with low volume because we are already in a recessionary period, we believe it could get. “And when there is low volume and volatility, it will force prices to go down faster, and it might cause more volatility.”
Featured Image: Megapixl @ Hello6373
Author Valerie Remorosa 
