In recent months, Bitcoin (BTC) has traded in tandem with stocks, with both asset classes battling prevailing macroeconomic factors led by skyrocketing inflation and interest rate hikes. However, Bitcoin’s volatility appears to cool down compared to traditional stocks as the flagship crypto shows signs of decoupling from equities.
In particular, as of October 7, the Dow Jones index that tracks the 30 largest industrial stocks was more volatile than Bitcoin, data shared ZeroHedgeindicates.
Bitcoin’s latest achievement highlights the asset’s maturing nature considering it has been classified among the most volatile investments. Notably, proponents have maintained that once Bitcoin matures, characterized by increased adoption, the asset will be less volatile and trade like traditional assets.
Overall, Bitcoin has historically been marred by volatility, but traditional financial markets are usually much more stable. However, the shift in volatility can be attributed to Bitcoin’s retreat from the all-time highs that have seen the asset consolidate around $20,000 for weeks.
In this case, the level is being treated as a temporary bottom for Bitcoin after the impressive bull run that culminated in an all-time high of almost $68,000 in late 2021.
At the same time, Bitcoin’s less volatility has emerged in the wake of a strong dollar that saw global fiat currencies lose value compared to the U.S. currency. In this line, the rising dollar can potentially negatively impact stock portfolios alongside crashing commodity prices.
However, Bitcoin has maintained stability, with investors in some regions turning to the asset as a hedge against skyrocketing prices.
In the meantime, Bitcoin continues to consolidate below $20,000 as it bears and bulls tussle to gain control. By press time, the asset was trading at $19,500 with losses of less than 1% in the last 24 hours.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
Bitcoin (BTC), the leading cryptocurrency by market value and trading volumes, is supposed to be relatively steady compared to other digital assets, protecting a trader's portfolio from wild swings in the broader market. However, bitcoin has been more volatile than ether (ETH) recently.
While bitcoin, other cryptocurrencies and gold offer high volatility and potential gains, the U.S. dollar is typically a safeguard against volatility in uncertain times.
Stocks are often volatile, but they tend to be less volatile than crypto. Individual stocks are more volatile than a portfolio of stocks, which tends to benefit from diversification. Stocks are better suited to investors who can leave their money alone and don't need to access it.
Cryptocurrencies have been dogged by risk-off sentiment in the broader financial markets amid a stagflationary feel in the U.S. following indications of slower growth and sticky inflation that have tapered hopes of an interest-rate cut by the Federal Reserve.
According to digital asset analytics firm K33 Research, bitcoin's five-day volatility has sunk below that of gold, the Nasdaq 100 and the S&P 500. This only happened a few times in recent years, K33 senior analyst Vetle Lunde pointed out, and every occasion preceded periods of wild price swings.
The influence of media and news on investor sentiment cannot be overstated. Positive news can lead to hype, driving up prices, while negative news can trigger panic selling. This cycle of news and investor reaction contributes to the high volatility seen in Bitcoin trading.
Will Cryptocurrency Replace Fiat Money? It's unlikely that cryptocurrency, in its current form, will replace fiat currency in developed countries. However, it is possible in financially struggling nations.
While the US dollar has maintained its value for decades. Fund Investors and expert traders may be attracted to Bitcoin, but ordinary people are risk averse Bitcoin can show its long-term stability, it can never replace the US dollar among the general public.
Bitcoin will be increasingly important as means of payment and an alternative asset, there is no doubt about that, but it is unlikely to displace the US dollar as the world's reserve currency.
A broadly diversified stock portfolio generally presents a safer option than cryptocurrencies because of their intrinsic value and history of delivering solid long-term returns. Cryptocurrencies may hold greater potential for outsized gains, but come with significant risk.
Bitcoin prices are volatile for many of the same reasons other investments are—supply and demand and how investors react to hype, news, and regulatory actions. The main difference between bitcoin and other investment prices is the magnitude in which its price changes.
Future Outlook: Bitcoin price predictions for 2024-2030 indicate continued volatility and potential for both bullish and bearish trends, with prices expected to fluctuate between various levels, reaching highs of $125,000 by 2025.
The traditional narrative stands in the line that Bitcoin will become more stable when its user base increases and it becomes more utilized in transactions. However, the past dynamics does not suggest that its volatility is in a downward trend (Baur and Dimpfl, 2021).
I think it's mostly speculative. That being said, for an investor who wants to have a hedge, I think there are some legitimate arguments to having a small position in Bitcoin. It clearly has shown it has the ability to be a valuable hedge in times of uncertainty, but it's not really time tested.
Will Bitcoin ever stop fluctuating? Bitcoin has only been around for a short time—it is still in the price discovery phase. This means that prices will continue to change as investors, users, and governments work through the initial growing pains and concerns until prices stabilize—if a stable point can be reached.
Bitcoin, the cryptocurrency, is most likely to remain popular with speculators over the next decade. Bitcoin, the blockchain, will probably continue to be developed to address long-standing issues like scalability and security.
Introduction: My name is Greg Kuvalis, I am a witty, spotless, beautiful, charming, delightful, thankful, beautiful person who loves writing and wants to share my knowledge and understanding with you.
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