Bitcoin volatility hits record low: the calm before the storm?

As Bitcoin trading volumes settle, speculation mounts of busy times ahead…

by Manoj Sharma for CNR

Bitcoin experienced its new yearly low in volume at the start of this month. It dropped in volume from $43 billion to $3.2 billion, and whilst in recent weeks the foremost cryptocurrency has managed to recover to $4.2 billion, it still remains quite low comparably.

The decline in trading volume could be attributed to the uncertainty in the short-term price trend of Bitcoin, which has contributed to the significant drop in its rate of volatility. Mike McGlone, a strategist at Bloomberg Intelligence, stated that the rate of Bitcoin’s volatility will rapidly decline as the market matures.

He explains that an emerging asset like Bitcoin often experiences discrepancy in price movements until a strong infrastructure is developed to support its market.

“This is a maturing market, so volatility should continue to decline. When you have a new market, it will be highly volatile until it establishes itself. There are more participants, more derivatives, more ways of trading, hedging, and arbitraging.”

As per the volatility chart of Bitcoin provided by Woobull in 2012, the coin previously achieved one of its lowest volatility rates in October 2013, and in just one year, the price of BTC then increased from $30 to $1000.

Historically, Bitcoin has been seen taking a dip in volatility and volume before initiating large rallies on the upside. As Garry Tan, a prominent venture capital investor says, “the crypto winter generally makes it safer for super-long-term oriented Yale-model institutions to enter at a price that isn’t dangerous. You know what is scary? Investing and then immediately seeing an 80% drop. That is hard to recover from”.

BTC is unlikely to experience a surge in its price, goes the theory. However, in the long term, stability could allow Bitcoin to increase the probability of both mid-term and short-term rallies.

Image: BigStock

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