Bitcoin Volatility Falling – Why It Could Be A Problem.

Is Bitcoin a Good Investment? Bitcoin Volatility Falling – Why It Could Be A Problem.

9 August 2023

Cryptocurrencies have been experiencing a prolonged period of sluggishness, with Bitcoin and other major digital assets failing to make meaningful gains in recent weeks. On Tuesday, the cryptocurrency market remained stagnant as volatility measures hit historic lows, leaving investors and speculators wondering: “Is Bitcoin a Good Investment?“.

Bitcoin’s price dropped by less than 1% in the last 24 hours, settling at $29,150. This marks a departure from its months-long support at the psychologically important threshold of $30,000 – which it fell below in late July.

Matteo Greco, an analyst at digital asset investment group Fineqia International, noted that market volatility has been comparatively low over the most recent two-week period. This is evidenced by the Bitcoin 10-day realized volatility falling and nearing levels below those typically seen in equity, bond and gold markets.

Bitcoin has been surprisingly consistent despite the volatility of the stock market, which saw significant changes in the Dow Jones Industrial Average and S&P 500. Last week, Bitfinex analysts noticed that Bitcoin’s 24-hour historical volatility (BVOL) had dropped to an all-time low.

According to the analysts, when the BVOL 24H metric drops to low values and begins a sideways trajectory, it often precedes a significant price movement for Bitcoin. They noted that the slight rise following such a lull may be an indication of potential volatility in Bitcoin’s near-term price trajectory. This pattern has been noticed before in previous scenarios, indicating that a significant and potentially volatile shift may be in store for the cryptocurrency.

For a long time, crypto bulls have argued that such low volatility is ultimately beneficial for Bitcoin since it indicates the start of a new bull market. However, there are reasons to believe the contrary is true.

Bitcoin relies on buyers to keep prices rising. Despite the appeal of low volatility for institutional investors, the widespread adoption of digital assets by major financial organizations has been a hopeful goal in crypto circles without much success over the years. This year, BlackRock and Fidelity have increased their presence in the crypto industry to some degree, but it appears that full investment into the crypto market by pension funds and insurance companies may still be quite a distance away. Despite major advances in recent years, it seems that Bitcoin’s most ambitious goals remain just beyond reach for now.

Moreover, it seems like retail investors are retreating from the crypto market, as Coinbase Global has reported a steep decline in trading volumes. This suggests that retail traders have been exchanging their Bitcoin and other tokens for more volatile ones, seeking out the rush that comes with it. Although increased volatility is not necessarily beneficial to these investors, it may be what Bitcoin needs to attract new buyers and push prices up. Ultimately, the market’s future depends on the rekindling of enthusiasm amongst traders.

So, is Bitcoin a good investment? This is a question that many investors have been asking lately.

Beyond Bitcoin, Ether, the second-largest cryptocurrency, has fallen less than 1% to $1,830. Smaller cryptos, or altcoins, were relatively unaffected, with Cardano and Polygon both losing less than 1%. Memecoins fell more, with Dogecoin and Shiba Inu both losing 2%.

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