Amid the economic chaos, Bitcoin is holding itself relatively stable. For now, at least.
The 20-day realized volatility of Bitcoin, a metric that measures daily changes in the price of Bitcoinfell below the level of the Nasdaq and S&P 500 for the first time in two years, according to results published this week by crypto data provider Kaiko.
Put simply, Bitcoin’s price has been much less volatile over the past three weeks. Just prior to the 20-day period in question, volatility in the crypto and equity markets had reached a 40-year high.
High inflation readings in the US economy have led many to expect the Federal Reserve’s terminal rate (the peak of their interest rate hikes) to be a long way off – the Fed has already raised its 0.75% rate thrice this year, the first of which was the steepest hike since 1994.
Kaiko also indicates that the spread between 30- and 90-day volatility readings for Bitcoin and stocks has narrowed since the second half of September.
The Nasdaq 100 and S&P 500 are down about 10% since the start of this month.
This is the first time since October 2020 that Bitcoin has been less volatile than Nasdaq.
It is also the first time since August 2020 that the world’s largest cryptocurrency has been more stable than the S&P 500.
Kaiko unpacks the numbers
Kaiko’s research director, Clara Medalie, said Decrypt via email that “BTC volatility has been declining since early July,” which is around the time the industry began to take stock of the liquidity crunch that emerged at the end of July. Following The Collapse of Terra.
Crypto trading volumes remained stable despite low volatility, suggesting that trading activity remained constant.
On the other hand, stocks have seen their volatility increase “due to a series of factors, including high interest rates, the appreciation of the dollar, persistent inflation, the energy crisis and the war”, a- she added.
Medalie also said that despite its current $19,000 – a far cry from its all-time high of around $69,000 in November 2021 – Bitcoin now appears to be acting as a kind of buffer against macroeconomic uncertainties: “The divergence in market activity market for both asset classes suggest that cryptocurrencies are more resilient to recent volatility-inducing macro events.
Bitcoin has sometimes been closely correlated with stocks, although crypto proponents would prefer not to, as it was designed to be an alternative to traditional financial investments.
However, data from IntoTheBlock’s Correlation Matrix records Bitcoin’s current correlation coefficient with the Nasdaq and S&P 500 as approximately 0.3. The closer this number is to zero, the less correlation there is. The closer we get to 1, the more the markets are correlated.
In short: Bitcoin really is starts to uncouple inventory this fall. The question is, will it stay like this?
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