Bitcoin (BTC) and Ethereum (ETH) have recently exhibited volatility levels somewhat lower than oil, with both cryptocurrencies moving laterally this season.
A recent study by Kaiko indicates that the famed volatility of cryptocurrencies has seen a notable decrease, influenced by various elements including governmental regulations and broader economic conditions.
The reduced fluctuation in these leading digital currencies now places them at “multi-year lows,” just beneath the volatility of oil prices.
👀📈#BTC and #ETH 90-day #volatility just dropped to multi-year lows at 35% & 37% each, making them less volatile than oil at 41%.🤔🗓 pic.twitter.com/VMfTW53goG
— Kaiko (@KaikoData) August 16, 2023
Bitcoin’s volatility over a 90-day period is recorded at 35%, whereas Ethereum is slightly above at 37%. In comparison, the 90-day volatility index for global oil prices is at 41%, marking a distinct shift in trends. Dessialava Ianeva, a principal analyst at Kaiko, labels this pattern as “atypical.”
Traditionally, BTC and ETH have been more unstable than oil and various other assets. However, the recent three-month trend has shown Bitcoin’s price mainly lingering around the $30,000 threshold.
Despite their reputation for volatility, both BTC and ETH experienced a drastic decrease, shedding over 55% of their market values last year amid a turbulent period for the entire digital currency landscape.
This year heralds a fresh start as BTC’s price has soared by 80% YTD, marking a significant spike in volatility.
According to the study, oil surpasses a range of assets assessed by Kaiko, including crypto, gold, and the tech-centric Nasdaq. Nonetheless, the volatility index for oil has seen a decline over the previous year, registering at 63% in July 2022.
Market volatility refers to the magnitude or rate of price changes for an asset over a set duration. Assets prone to substantial fluctuations are often deemed high-risk because their rapid price shifts expose investors to greater potential hazards.
Wider macroeconomic factors and market trends
Kaiko’s analysts attribute the changes in market volatility to geopolitical strains, notably Russia’s incursion into Ukraine which sparked worldwide sanctions, and the challenges China faced in restarting its economy post stringent Covid-related interventions.
Ianeva further remarked that the decrease in Bitcoin’s volatility is indicative of the “asset’s maturation.” As its adoption intensifies, Bitcoin’s volatility tends to diminish, especially when contrasted with its early days.
Lastly, the study emphasized the role of liquidity as another integral on-chain determinant influencing the volatility decline. Ianeva noted that in recent months, major assets such as BTC and ETH have seen reduced trade volumes and liquidity.
Amid the recent regulatory push in the US market, investors are growing wary of the Securities and Exchange Commission (SEC) and its stance on greenlighting a spot BTC ETF.
However, there’s a silver lining. Should the approval of a spot ETF come through, even if it’s a few months down the line, it could serve as a catalyst, propelling BTC’s price and the overall market capitalization to unprecedented levels.