Bitcoin’s Volatility Below Stocks: Boon or Bane? – Bitcoin (BTC/USD), Coinbase Global (NASDAQ:COIN)

Considered to be one of the most volatile asset classes around, cryptocurrencies have been in a fairly deep hibernation since May 2022 when central banks around the world started raising interest rates to stem the impact of high inflation.

Major cryptocurrencies such as Bitcoin BTC/USD has been emblematic of this trend, with prices correcting over 70% from all-time highs and currently trading at a critical support level.

In comparison, the S&P500 has fallen nearly 25% from its recent peak and has outperformed Bitcoin over the same period.

Still, with Bitcoin’s 30-day volatility and daily trading volumes falling to levels last seen in December 2020, crypto investors seem confused by price volatility.

Making matters worse is the fact that more than 20% of the companies included in the S&P500 index have shown greater volatility than Bitcoin, without the same cut in valuations that the world’s largest cryptocurrency has witnessed over the past one-year period.

Also Read: Ethereum Liquidations Hit $759M Since Merger What’s coming?

But isn’t lower volatility better for Bitcoin and other cryptocurrencies?

Generally speaking, asset classes witness low price volatility when they consolidate at key resistance or support levels. This means a maturing of trading activity, with weaker hands giving way to investors with a stronger risk appetite and a more positive outlook towards future price appreciation potential.

But combined with other parameters such as the general trend, daily trading volumes and participation of private investors, a more complete picture can be obtained.

In Bitcoin’s case, the trend has been extremely bearish over the past 10-month period, with each rally being sold on multiple occasions.

In terms of trading volume as well, Bitcoin’s average daily trading volumes are far from those recorded in 2021. Combining both factors, it can be easily assumed why retail investors have been worst affected in terms of sentiment, with a study of crypto. the firm Grayscale Investments highlights that 55% of Bitcoin investors began their journey in 2021.

This is confirmed by data from Coinbase Global Inc COINone of the largest crypto exchanges by trading volume, which stated that only 24% of the entire trading volume in the first quarter of 2022 was contributed by retail investors.

Have institutional investors changed the game for Bitcoin?

Despite a general decline in crypto trading volumes in 2022, the share of institutional investors has been on the rise since the last four quarters, if you go by Coinbase’s results.

Even in the subdued first quarter of 2022, institutional investors contributed to 76% of the platform’s total trading volume.

While data for individual cryptocurrencies such as Bitcoin is not available, it is reasonable to assume that similar percentages would be justified for what is the most popular cryptocurrency in the world today.

Also, institutional investors are generally considered to be in it for the long term, as they tend to hold on to their assets, even through periods of high volatility or sharp price corrections.

The last aspect is what unfolded in the second quarter of 2022 when Coinbase results for the quarterr showed that Bitcoin accounted for 31% of all transaction revenue.

Bitcoin’s healthy share is a testament to the fact that while the entire crypto market is slowly going through this corrective phase, mature investors will continue to place bets on Bitcoin, considering their position as the top crypto.

And institutional investors are definitely holding on to their Bitcoin positions, even though their overall value has taken a beating lately.

A sharp rally ahead or a further fall?

Even ardent crypto fans are intimidated by the divergent price predictions floating around the internet today.

While crypto evangelists still cling to the “Bitcoin at $100,000 by December 2022” prophecies, technical analysis suggests that the $30,000 mark is the first real hurdle.

Obviously, this is considering that Bitcoin does not fall below the $18,500 support level it has respected in recent months, below which the gates could really open to lower levels.

While it is impossible to predict how Bitcoin or any other cryptocurrency may fare in the near future, it is important for investors and traders to look to the global financial markets for clues.

If inflation continues to rear its ugly head, the U.S. Federal Reserve may be forced to follow through on rate hikes, squeezing additional liquidity out of risky asset classes like cryptocurrencies.

On the other hand, any dovish outlook could spur a quick short-covering rally, to the delight of battered crypto investors. In any case, the ball has been set in motion and time will tell who will emerge victorious at the end of 2022.

Next: Will the rise of quantum computing be a threat to Bitcoin?

Don’t miss out The Future of Crypto by Benzinga on December 7 in New York City. Click here for more information.

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