A New Competitor Could Remove Bitcoin, the King of Volatility

A New Competitor Could Remove Bitcoin, the King of Volatility

Bitcoin has many qualities. Like loud, deceptive, confusing, and even phony currency. It has never been boring, however, it has been terribly subdued in recent times, as the King of Fluctuations has been dealing with circumstances uncharacteristically until the crypto winter came that turned the equations upside down and which changed reality in all directions and has been swirling for days still About $20,000, which he hasn't strayed far from since last June 2022.

This has caused problems for traders and exchanges taking advantage of wild and swinging bitcoin prices, which opens the door to the rival ether poised to advance the crypto game by moving to a more agile and flexible blockchain.

Martin Lennweber, Digital Asset Product Strategist at Market Vector, said:

“Bitcoin is not dead, it is boring at the moment, so traders are already looking for alternatives.”

According to data company coin glass, the 30-day average volatility of bitcoin — a measure of how its price has varied over a given period — has fallen to 2.7% from more than 4% in early July.

That number held steady at less than 5% in 2022, even in the most turbulent month of the “crypto winter” of low prices, a departure from the past five years when periods of low volatility were followed by spikes of up to 7%.

Likewise, an index from CryptoCompare, which uses Bitcoin futures to determine the expected extent of price change, stands at just over 77, down more than 90 since the start of the year.

Bitcoin has seen periods of low volatility in the last period, which often returns to its price with higher trading activity, but this recession may be different.

Stéphane Ollett, CEO of crypto derivatives provider FRNT Financial stated:

“This has been a relatively long period of low volatility, it has now surpassed anything we saw even in 2019 as these levels lasted from about a quarter to half a year.”

The faster growth and rise of Ether compared to Bitcoin

Market Vector's Linweber cited a slight increase in Ether and its derivatives trading as a side effect of Bitcoin's weak volatility.

In fact, the price of ether – the No. 2 cryptocurrency with a market capitalization of about $190 billion versus $380 billion of bitcoin – has increased by 50% since the beginning of July while bitcoin has remained flat.

Ether does not offer more dramatic prices; It is much less volatile, having had a high of just over 2% in March 2020 during the worst market downturn due to Covid, according to data firm Messari.

However, ether is absorbing a lot of the negative hype surrounding the digital currency at the moment as it stands on the verge of “consolidation,” and that is finally expected to happen later this month when it undergoes a major transformation into a system where new ether tokens are created. It becomes much less energy-consuming.

Profit levels burn due to the reduced volatility of cryptocurrencies

For long-term investors in traditional assets such as stocks or bonds, limited volatility in prices may seem like a positive thing. But for many investors and major companies in the bitcoin and cryptocurrency economy, this is not the case. Exchanges, for example, make money by charging trade fees; When volatility decreases, trading activity tends to evaporate.

For digital hedge funds, which tend to trade on price swings, fixed values ​​also provide diminishing opportunities for profit.

What is behind Bitcoin's low volatility?

Cryptocurrencies have had a rough year as investors dump risky assets across the board in the face of rising inflation, with bitcoin down nearly 60% and ether down 55%. Big explosions in two major currencies and the bankruptcy of a famous lender have also eroded confidence in the sector.

The dollar value of bitcoin trading volumes on major exchanges over 7 days also fluctuated between $127 million and $142 million, according to blockchain data, the lowest since October 2020. Likewise, trading in bitcoin futures has been at an all-time low. . and levels since November 2020, data from Block showed.

Owlette said:

“The highest levels of volatility usually coincide with the highest levels of interest in cryptocurrencies.”

“People are losing and saying 'I don't really care about crypto at the moment."