Bitcoin and Ethereum exhibit surprising stability: Kaiko research compares volatility to oil amid liquidity woe

Bitcoin and Ethereum exhibit surprising stability: Kaiko research compares volatility to oil amid liquidity woe

Bitcoin and Ethereum, the dynamic duo of the cryptocurrency world, have taken on an unexpected role: harboring stability akin to oil prices as they meander through a summer of relative calm.

Recent research from Kaiko has unveiled a noteworthy transformation in the once-infamous cryptocurrency volatility landscape. This surprising shift has brought Bitcoin and Ethereum’s roller-coaster-like price swings down to “multi-year lows,” closely resembling the undulating journey of oil prices.

To be precise, Bitcoin’s 90-day volatility index has settled at 35%, while Ethereum hovers slightly higher at 37%. This places them just below oil’s 41% 90-day volatility index, a peculiarity noted by Dessialava Ianeva, a lead analyst at Kaiko, as “unusual.”

Traditionally, Bitcoin (BTC) and Ethereum (ETH) have been the poster children for volatility, overshadowing even the most tumultuous of traditional assets. However, the past three months have seen them huddle around the $30,000 mark, embracing a steadier stance.

Rewinding the clock, it’s worth recalling the turmoil of the previous year when both BTC and ETH lost more than 55% of their market value. A year of resurgence, 2023 has witnessed Bitcoin skyrocketing 80% year-to-date, despite its volatility taking a noticeable nosedive.

Examining the diverse array of assets, Kaiko’s research positions oil at the helm of the volatility leaderboard. This list encompasses cryptocurrencies, gold, and even the tech-centric Nasdaq. Yet, even oil’s once-rampant volatility has retreated over the past twelve months, down from a towering 63% in July 2022.

Volatility in the financial realm speaks to the extent and frequency of price changes within a specific time frame. Assets known for their wild price oscillations often carry heightened volatility, posing elevated risks for investors.

Delving into the underpinnings of this volatility evolution, Kaiko’s analysts highlight macroeconomic influences. The geopolitical landscape, marred by Russia’s incursion into Ukraine triggering international sanctions and China grappling with the aftermath of stringent Covid measures, has cast its shadows on the market.

Ianeva also draws attention to the maturation of Bitcoin as a contributing factor to its reduced volatility. As the cryptocurrency garners more acceptance and penetrates mainstream markets, its turbulent youth appears to be giving way to a more tempered adulthood.

Intriguingly, liquidity emerges as another critical facet impacting volatility dynamics. Over the past months, notable assets like BTC and ETH have experienced declines in trade volumes and liquidity. This phenomenon intertwines with recent regulatory stirrings in the United States. The Securities and Exchange Commission’s (SEC) scrutiny over a potential Bitcoin exchange-traded fund (ETF) has introduced an air of caution among investors.

While the road ahead remains uncertain, the prospect of an approved spot ETF has the potential to pivot the narrative. Though its realization may lie several months in the future, such an event could herald a resurgence in BTC prices and a broader uptick in market capitalization. The ever-evolving cryptocurrency arena continues to intrigue, defying expectations as it seeks a foothold in the broader financial landscape.

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