Bitcoin Volatility Falls to Two-Year Low as TradFi Markets Wobble

Despite its reputation as an unpredictable and risky asset class, crypto hasn’t been particularly volatile over the past few weeks.

Bitcoin’s 20-day volatility has matched that of the NASDAQ for the first time in two years, according to crypto market data provider Kaiko. But while the price of bitcoin has stayed about the same Since early September, the NASDAQ and S&P are down 13% and 10%, respectively.

Historically, bitcoin was closely correlated with tech stocks, but with higher beta (volatility relative to the rest of the market) — defying its label of safe haven or “digital gold” in some quarters. However, despite a violent crash in June, Crypto has proven be one of the best-performing asset classes in Q3 alongside the US dollar.

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As with its volatility, Bitcoin’s actual price fell last week to lows from late 2020 after the key US consumer price index, or CPI (which excludes food and energy), hit another 40-year high. Both bitcoin and stocks fell on the news but quickly rebounded in their respective ranges.

The initial collapse in June followed the release of May’s CPI data, which showed inflation at 8.6%. Markets took this as a sign that the Fed would not end its aggressive policy anytime soon, inspiring participants to divest from ‘riskier’ assets.

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Although inflation has stayed around the same level, crypto hasn’t seen any notable price action on subsequent CPI updates. Stocks, on the other hand, continue to trickle down.

Meanwhile, hawkish stances from central banks around the world are beginning to transform bonds into a volatile but rewarding asset class. As Bloomberg As reported last month, bond yields have skyrocketed thanks to Fed policy, while DeFi yields have fallen below 100 basis points on protocols like Aave.

Last week popular Twitter analyst Will Clemente written down how treasury market volatility has skyrocketed versus bitcoin volatility in recent months. At the same time, stock volatility was also hitting all-time highs relative to bitcoin volatility.

“This shows how much volatility compression Bitcoin is currently experiencing,” he tweeted On the next day.

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With assets around the world showing weakness alongside the dollar, even the United Nations has weakness called the Fed to stop raising interest rates. But the central bank is currently showing no signs of stopping.

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