Bitcoin’s Low(ish) Volatility Is Good News For Crypto – Forbes


Bitcoin is evolving, and is bringing the entire crypto sector along for the ride
Given the tumultuous news cycle that has dominated airwaves, both within the United States and internationally, investors would be reasonable to expect that this volatility would carry over to the crypto sector. Bitcoin BTC specifically, long associated with higher-than-normal volatility, seems like an asset that would mirror this higher volatility. Instead, and to the surprise of some market watchers and investors, the price of bitcoin has continued to hold steady for the last several months. This price stability has existed even as 1) Blackrock and multiple other large TradFi institutions has submitted applications for ETFs, 2) the SEC suffered a partial setback in its legal campaign against crypto, and 3) the Federal Reserve continues to actively discuss both the potential of a U.S. CBDC as well as more regulations for banks involved with the crypto space.
In a recent Bloomberg article, rapidly circulated elsewhere following initial publication, there have been statements that this recent price stability is due to investor apathy and exhaustion. On the surface this sounds like a reasonable assessment; prices are still significantly off of all-time highs, Coinbase has become embroiled in legal action against the SEC, and the aftermath of FTX continues to cast a long shadow over the entire space.
Apathy and exhaustion, however, are not words that seem accurate to describe institutional interest in crypto and tokenized asset applications. One need to just look at the recent announcement by PayPal PYPL , launching a robust native stablecoin, for evidence of this.
Price stability does not mean apathy and exhaustion, far from it; let’s take a look at why this period of stability is healthy for bitcoin and the crypto space at large.
One common argument that has been made during times of price stability, including the current run, is that this price stability is reflective of a weaker appetite for bitcoin and lower interest in crypto at large. This is a simplistic response that misses several important drivers that power the ecosystem forward. From research presented on, both the hash rate and network growth have shown signs of improvement during this period, indicating that under a calm surface that is strong activity underneath.
One other note that is worth highlighting is that according to Glassnode research the number of addresses holding 10 or more bitcoin (including whales) have hit a three-year peak in excess of 157,000. These pieces of information seem to show an ecosystem that is both healthy, and continues to attract investors with confidence in its future.
TradFi has continued to make significant investments into the cryptoasset sector, and the move toward the creation and marketing of an increasing number of products and services recently (such as the multiple ETF applications recently submitted), indicates that this is just the beginning of a changing landscape. Lower price volatility around bitcoin, and cryptoassets more broadly, should be seem as both a cause and effect of the uptick in the interest and investment of TradFi into cryptoassets. This trend is also important for the sustainable and long-term health of the cryptoasset sector; major investment trends are driven either by automated investing algorithms and by passive investors, neither or which tend to like wildly flucuating valuations.
Redditors and trading threads on social media tend to lead the conversation in terms of the crypto sector, large passive investors such as pension funds and asset managers tend to shape market direction and trends. Wild swings in valuation are not conducive to either the long-term decisions fund managers to need make, nor the steady returns expected by stakeholders. Lower volatility is both a cause and effect of growing TradFi interest.
Something worth repeating is that the cryptoasset sector is much larger than just bitcoin. Although its continues to dominate business headlines and policy conversations, it is just one cryptoasset in a rapidly expanding ecosystem for tokenized asset products and services. For example, the vast majority of Layer 2 and more advanced tokenization projects do not run on the bitcoin blockchain. Rather the bulk of these innovative use cases are built on the Ethereum ETH blockchain, rekindling discussions of when torch of leadership might passed from BTC to ETH. The recent approval of a ETH futures contract offering is further evidence of this trend.
In addition, other projects such as decentralized autonomous organizations (DAOs) along with the associated governance tokens, provide a readily understandable business use case for entrepreneurs seeking to capture the benefits of tokenization. Other subsets of the crypto space, such as stablecoins and non-fungible tokens (those not focused exclusively on price appreciation), continue to expand, develop, and play a more prominent role in the crypto space.
Price stability is a positive trend for the crypto sector, and should be treated as a sign of a maturing and expanding ecosystem.


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