MarketVector’s most recent data indicates a notable decline in volatility across the cryptocurrency market’s several sectors, with Bitcoin (BTC) leading the way.
There has been a noticeable decrease in the 90-day annualised volatility of Bitcoin, which is consistent with a pattern that has been noted for the past year.
This downward trend is seen in all domains: decentralised banking, media and entertainment, infrastructure applications, smart contract platforms, centralised exchanges, and all have reported comparable declines in their volatility metrics.
Experts attribute this stabilisation in large part to the introduction of spot Bitcoin ETFs earlier this month.
ETFs and the stability of Bitcoin
The launch of US Bitcoin spot exchange-traded funds (ETFs) has revolutionised the cryptocurrency industry and brought Bitcoin’s 12-month volatility to an all-time low.
The market is seeing a trend towards more stable trading conditions as it is anticipated that the ETFs will continue to smooth out the price swings of Bitcoin.
Since January 2012, when it peaked at 179%, the annualised volatility of Bitcoin has decreased to just 45% in January 2024.
This seeming stability may be a sign of an investor trend away from the short-term speculative trading that has previously defined the cryptocurrency market and towards long-term ownership.
Long-term holding over speculative trading
The decline in volatility indicates that Bitcoin is evolving as an asset class and winning over more seasoned investors.
Experts predict that a significant portion of Bitcoin will be kept in long-term investment accounts when more spot Bitcoin ETFs are introduced and added to advisers’ portfolios.
This pattern is anticipated to play a significant role in reducing market volatility because advisers don’t trade frequently.
