Bitcoin, the original cryptocurrency, has long been associated with high volatility. However, a recent report by Kaiko Research suggests that its volatility is on the decline as the market matures. Last week, Bitcoin experienced fluctuations in prices, ranging from $66,000 to nearly $70,000 in a single day. By the end of the week, the flagship coin settled slightly above $66,600, marking a decrease of just over 4% for the week. Selling activity outpaced buying on most exchanges, with top trading pairs recording a net cumulative volume delta of $518mn between June 10-14, particularly on platforms like Binance and Bybit.
Despite the short-term rollercoaster ride driven by macroeconomic news, Bitcoin has demonstrated signs of maturation. The research points out that Bitcoin’s 60-day historical volatility has consistently remained below 50% since the beginning of 2023. This is a stark contrast to the extreme fluctuations observed in 2022 when volatility exceeded 100%. In fact, Bitcoin’s volatility hit an all-time low of 40%, significantly lower than the peaks of over 106% seen during the record highs of 2021. Even the introduction of spot Bitcoin ETFs in the US did not lead to significant spikes in volatility, indicating a relative stability in price action.
One key factor contributing to the decreased volatility in Bitcoin is the evolving market structure over the past year. The report highlights that the US market now commands a higher share of trading volumes, with BTC liquidity becoming more concentrated around the East coast trading window. As a result, trends in Bitcoin ETF demand should not be overlooked when analyzing price movements. Last week, a reversal of inflows in US Bitcoin ETFs, coupled with macroeconomic news, likely added to the selling pressure. Like other emerging asset classes, cryptocurrency is susceptible to heightened volatility due to new capital flows.
As evidence of the market maturation, Kaiko Research found that Blackrock has surpassed Grayscale’s Grayscale Bitcoin Trust in terms of assets under management. The $10 trillion asset manager now holds the title of the world’s largest spot Bitcoin ETF, signaling a growing interest from institutional investors in the cryptocurrency space. Such developments indicate a shifting landscape where traditional financial players are increasingly taking part in the digital asset market, potentially contributing to the overall stability of Bitcoin’s price movements.
While Bitcoin’s past reputation as a volatile asset may still hold true in some instances, the data suggests a gradual decrease in volatility as the cryptocurrency market evolves and matures. The adoption of Bitcoin ETFs, changes in market structure, and the growing participation of institutional investors all play a role in shaping the future trajectory of Bitcoin’s price movements.