A crash in cryptocurrency prices and the start of a new so-called “crypto winter” has left many companies in the industry facing a liquidity crunch.
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While bitcoin’s price has been stalled lately, there’s one good thing for investors to bet on crypto to become a legitimate asset class: it’s less of a wild ride.
After hovering at the $19,000 level for more than a month, bitcoin’s volatility is now below that of the Nasdaq and S&P 500, according to Kaiko.
The data provider said on Friday that the cryptocurrency’s 20-day rolling volatility has now fallen below that of stock indices for the first time since 2020. On Monday, it had fallen enough to match the volatility of the Nasdaq. This is good news for many long-time crypto investors who are hoping that a softening of notorious crypto price swings might bring less fear to potential new investors.
Kaiko also said that the spread between bitcoin’s and equities’ 30- and 90-day volatilities has narrowed since mid-September, even with bitcoin’s heightened sensitivity to macroeconomic data releases. (Although bitcoin’s correlation to stocks has eased, it remains elevated and its price continues to be driven by macro themes.)
“Bitcoin volatility is at multi-year lows while equity volatility is only at its lowest level since July,” Clara Medalie, head of research at Kaiko, told CNBC. “Equity markets have certainly been volatile over the past several months due to high inflation, a stronger dollar, rising interest rates and the ongoing war and energy crisis. The data suggests that cryptocurrency markets are less reactive to volatile macro events than they were earlier in the year, while equity markets remained very sensitive.”
On Friday, bitcoin briefly dipped below the $19,000 level, following a brief spike in the dollar index and as the 10-year US Treasury yield hit a 14-year high. However, it has since rebounded.
Bitcoin price was 0.7% higher at $19,189, according to Coin Metrics. Earlier today, it fell to $18,677.50. Ether added 1.4% to trade at $1,302.40, after finding an earlier low of $1,254.80.
On Friday, the 10-year US Treasury yield hit 4.308% for the first time since 2008, but fell after a report that some Federal Reserve officials are worried about excessive tightening with rate hikes. The dollar index also briefly jumped to a session high of 113.906 before shedding most of its gains.
The two largest cryptocurrencies by market capitalization are set to post a week of declines and their third consecutive negative week, in what is historically a strong month for crypto returns. For the month, bitcoin and ether are down around 1% and 3%, respectively.
“While we’ve seen signs of declining demand in the housing market and slowing inflation this week, the market is on high alert for next month’s FOMC meeting and ignoring economic data coming in. may warrant a more cautious approach to rate hikes,” Yuya Hasegawa said. , a crypto market analyst at Japanese crypto exchange Bitbank.
“We probably won’t see a big move before the meeting,” he added. “However, the area around $19,000 will likely continue to be support for bitcoin price.”
—CNBC’s Christina Cheddar Berk contributed reporting