Ecoinometrics - Volatility crunch

What to expect when Bitcoin behaves like a stablecoin?

It is that time of the year again when there is so little volatility in the cryptocurrencies market than in comparison stocks look like roller coasters.

Ok maybe I’m exaggerating a little bit.

Still, this is not the first time Bitcoin has experienced periods of low volatility like this one. So what can we expect from the price action moving forward?

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Volatility crunch

Who would have thought that this day would ever come, where Bitcoin is less volatile than not only major stocks like Apple, but also less volatile than stock indices and even less volatile than some currencies like the British Pound. 

Wait a minute? Actually this has happened before. Check out the realized volatility of Bitcoin vs the stock market on the chart below.

As a matter of fact this situation happened a grand total of 6 times since the creation of Bitcoin. Every time this happens, it is a mix of two things:

• The volatility of the stock market is elevated.

• At the same time Bitcoin’s volatility is dropping.

So it isn’t like this situation is totally unprecedented. Just go back to the fall of 2020 for the last time this happened.