Bitcoin Volatility Less Than Stocks: Boon or Doom?  Bitcoin (BTC/USD), Coinbase Global (NASDAQ: COIN)

Bitcoin Volatility Less Than Stocks: Boon or Doom? Bitcoin (BTC/USD), Coinbase Global (NASDAQ: COIN)

Being one of the most volatile asset classes in existence, cryptocurrencies have been in a rather deep recession since May 2022 when central banks around the world began raising interest rates to thwart the impact of high inflation.

Major cryptocurrencies like Bitcoin Bitcoin / US Dollar It was a symbol of this trend, as prices have corrected more than 70% from their all-time highs and are currently trading at a critical support level.

In comparison, the S&P500 is down about 25% from its recent peak and has outperformed Bitcoin in the same period.

However, with Bitcoin’s 30-day volatility and daily trading volumes dropping to levels last seen in December 2020, crypto investors seem to be confused by the price action.

Adding insult to injury is the fact that more than 20% of companies included in the S&P500 index have shown greater volatility than Bitcoin, without the same drop in valuations that the world’s largest cryptocurrency experienced in the past year’s period.

Also Read: Ethereum Liquidations Reach $759 Million Since Merger. What awaits us in the future?

But isn’t lower volatility better for Bitcoin and other cryptocurrencies?

In general, asset classes experience low price volatility when they consolidate at important resistance or support levels. This indicates the maturation of trading activity, with weaker hands giving way to investors who have a greater appetite for risk and a more positive outlook towards the possibility of higher prices in the future.

However, when combined with other parameters such as general trend, daily trading volumes and retail investor participation, a more complete picture can be reached.

In the case of Bitcoin, the trend has been very bearish over the past 10 months, selling off every rally on multiple occasions.

In terms of trading volumes as well, the average daily volumes in Bitcoin are a far cry from those recorded in 2021. Combining these two factors, it can easily be speculated why retail investors have been the hardest hit in terms of sentiment, with a study by crypto firm shedding light on Grayscale Investments highlights that 55% of Bitcoin investors started their journey in 2021.

This is confirmed by data from Coinbase Global Inc Currencyone of the largest cryptocurrency exchanges by trading volume, which reported that only 24% of its entire trading volume in the first quarter of 2022 was contributed by retail investors.

Have Institutional Investors Changed the Bitcoin Game?

Despite the general decline in cryptocurrency trading volumes in 2022, the share of institutional investors has been on the rise since the past four quarters, if Coinbase results.

Even in the quiet first quarter of 2022, institutional investors contributed 76% of the platform’s total trading volume.

While data for individual cryptocurrencies such as Bitcoin is not available, it is fair to assume that similar percentages would be guaranteed for what is the most popular cryptocurrency in the world today.

Furthermore, institutional investors are generally seen as a long-term asset, as they tend to hold onto their assets, even during periods of high volatility or severe price corrections.

The last aspect is what was revealed in the second quarter of 2022 when Coinbase’s Quartet resultss Show that Bitcoin accounts for 31% of all transaction revenue.

The healthy Bitcoin share is a testament to the fact that while the entire cryptocurrency market is slowly going through this corrective phase, mature investors will continue to bet on Bitcoin, considering its position as the best cryptocurrency.

And institutional investors are sure to hold their positions in bitcoin, even if its total value has been battered in the recent past.

A sharp march ahead or another landing?

Even crypto enthusiasts are horrified by the mixed price predictions floating around on the internet today.

While crypto evangelists are still sticking to their predictions of “Bitcoin at $100,000 by December 2022,” technical analysis hints that the $30,000 mark is the first real hurdle.

This is obviously considering that Bitcoin is not dropping below the $18,500 support level that has been honored in the past few months, which could open the gates below to lower levels.

While it is impossible to predict how Bitcoin or any other cryptocurrency will perform in the near future, it is important for investors and traders to monitor global financial markets for clues.

If inflation continues to rear its ugly head, the US Federal Reserve may have to pursue higher interest rates, squeezing more liquidity from risky asset classes such as cryptocurrencies.

On the other hand, any dovish outlook could lead to a rapid rise in short selling, to the delight of battered crypto investors. Either way, the ball has been moved and time will tell who will emerge victorious at the end of 2022.

Next: Will the rise of quantum computing be a threat to Bitcoin?

do not miss The future of encryption by Benzinga On December 7th in New York City. Click here for more information.

picture: Jantsarik via shutterstock

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