Bitcoin's volatility has been a focal point in the cryptocurrency market, with significant shifts and implications for investors. Here is an overview based on the provided sources:
Current Trends: Bitcoin's volatility has been on a downward trajectory, reaching new all-time lows on a yearly scale. This decreasing volatility trend is a positive sign of maturation in the cryptocurrency market, aligning with the typical evolution of new assets undergoing price discovery and stabilisation.
Historical Context: Bitcoin's volatility has shown fluctuations over time, with periods of high volatility, such as in 2014, when the 90-day volatility exceeded 200%. However, recent data indicates that in 2023, the 90-day volatility of Bitcoin's price was below 50%, marking a significant decrease.
Comparison to Traditional Assets: Despite its reputation for volatility, Bitcoin has been less volatile than many S&P 500 companies, with 33 of them exhibiting higher volatility than Bitcoin. This comparison highlights Bitcoin's evolving position in the investment landscape and its potential to become a more stable asset over time.
Market Maturation: The decreasing volatility in Bitcoin is attributed to the cryptocurrency's maturation, evidenced by rising market capitalisation and increased participation from traders and investors. As the market matures and capital inflows grow, the impact of new capital on Bitcoin's volatility is expected to diminish.
Impact of ETFs: The approval of U.S. spot Bitcoin exchange-traded funds (ETFs) in January was anticipated to reduce Bitcoin's volatility by dampening the impact of new capital inflows. However, despite these developments, Bitcoin experienced a notable decline in value over a recent period.
In conclusion, Bitcoin's volatility is a dynamic aspect of its market behaviour, influenced by factors like market maturation, regulatory developments, and capital inflows. The decreasing volatility trend suggests a potential shift towards a more stable and mature asset class, positioning Bitcoin as a significant player in the evolving financial landscape.
