Bitcoin Unusually Stagnant Hovering Well Below $20,000

Bitcoin the king of the cryptocurrencies has been unusually stagnant for days at around $20,000 and hasn’t gone much higher since June. During the fourth consecutive day, bitcoin news reported it below $20,000 at $18,723.80 Wednesday.

Bitcoin’s wild price lurches spell trouble for traders and exchanges, and Ether is preparing to up its crypto game with a meaner and leaner blockchain in an effort to compete with it.

According to MarketVector’s digital asset product strategist Martin Leinweber, Bitcoin isn’t dead, it’s just boring at the moment, so traders are looking for alternatives.

Based on Coinglass data, bitcoin’s average 30-day volatility has dropped from over 4% in early July to 2.7% now.

In 2022, even during the most turbulent months of the “crypto winter” of depressed prices, that number has remained below 5%, unlike five years ago when spikes as high as 7% were common.

CryptoCompare’s index of how far prices are expected to change based on Bitcoin futures contracts stands at just over 77, down from above 90 at the start of the year.

The price of bitcoin has fallen or depressed during periods of low volatility in the past.

There is a possibility that this slump will be different.

This is the longest period of decreased volatility since even 2019 when levels lasted around a quarter to a quarter-and-a-half,” said Stephane Ouellette, CEO of FRNT Financial, a crypto derivatives provider.

A side-effect of bitcoin’s subdued volatility has been an increase in trading for Ether and its derivatives, according to Leinweber at MarketVector.

In fact, Ether’s price has risen 50% since the start of July while Bitcoin’s has remained flat at $380 billion.

Its peak level was just over 2% during the worst of the Covid market rout in March 2020, according to Messari data. Ethereum doesn’t offer more price drama; it is far less volatile.

While it soaks up a lot of the crypto buzz at the moment, it is expected to undergo a radical change later this month, when it switches to a system where new Ether tokens are created much less energy-intensively.

A narrower swing in stock or bond prices can seem positive to long-term investors. However, that’s not true for many investors and major players in the crypto economy. Trading activity tends to decline when volatility falls, for instance, because exchanges charge fees on trades.

Additionally, stabler values offer diminishing profits for crypto hedge funds, which trade on price swings.

What is causing Bitcoin’s volatility to fall?

The broader crypto space is seeing an investor flight, which means fewer people are willing to trade their coins.

With Bitcoin falling more than 60% and Ether dropping more than 55%, cryptocurrencies have suffered a torrid year as investors have dumped risky assets across the board due to rising inflation. The bankruptcy of a big-name lender and major blow-ups at two major coins have further undermined confidence.

During the past seven days, Bitcoin trading volumes on major exchanges fluctuated between $127 million and $142 million, the lowest levels since October 2020, according to Blockchain.com data.

Data from the Block shows that Bitcoin futures trading has reached its lowest level since November 2020.

Ouellette said that high levels of volatility coincide with high levels of interest in crypto. “People got burned and are saying ‘I don’t care about cryptocurrency right now.'”

Source: Reuters