Bitcoin, the original cryptocurrency, has long been known for its extreme volatility. However, recent research by Kaiko Research suggests that this volatility is on the decline as Bitcoin matures. Despite this overall trend, last week saw a rollercoaster ride for Bitcoin prices due to macroeconomic updates in the US. Prices swung from $66,000 to nearly $70,000 in a single day before settling back down to just above $66,600 by the end of the week. This resulted in a 4% dip for Bitcoin, with selling outpacing buying on most exchanges.
Despite the short-term fluctuations caused by macro news, Bitcoin has shown signs of maturation in 2024. Kaiko’s research indicates that Bitcoin’s historical volatility has remained below 50% since the beginning of 2023, a significant decrease from the volatility levels seen in 2022 when it exceeded 100%. The introduction of spot Bitcoin ETFs in the US also had a relatively muted impact on Bitcoin’s volatility, indicating a potential shift in the market dynamics. The report highlights that changes to Bitcoin’s market structure over the past year, such as higher trading volumes during the US market close, may be contributing to the current stable price action.
One notable factor affecting Bitcoin’s price movements is the demand for Bitcoin ETFs. Last week, a reversal of inflows in US Bitcoin ETFs led to some selling pressure on Bitcoin prices, alongside other macroeconomic news. As cryptocurrency continues to attract new capital flows, higher volatility is expected. Kaiko’s report also reveals that Blackrock has surpassed Grayscale’s Grayscale Bitcoin Trust in terms of assets under management, solidifying its position as the world’s largest spot Bitcoin ETF.
Bitcoin’s journey towards maturation is evident through the decreasing volatility and evolving market trends. While short-term fluctuations may continue to occur, the overall trend towards stability and market consolidation bodes well for the future of Bitcoin as a mainstream asset class. Investors and analysts alike should pay close attention to the evolving dynamics of the Bitcoin market and the impact of institutional players like Blackrock on its long-term price trajectory.