Bitcoin Achieves Record-Low Annual Volatility: Positive Implications
The volatility of Bitcoin poses a challenge for substantial investments. In 2021, the Bank of America research group highlighted this drawback, stating: Bitcoin’s exceptional volatility makes it “impractical as a store of wealth or payments mechanism”.
In 2023, the crypto market faced new hurdles:
- SEC wants to label altcoins as securities
- Crypto exchanges face legal claims
- BUSD, the third-largest stablecoin, exited the market
- Binance’s CEO admitted to breaking laws, resulting in a record $4.3bn fine for the industry
There were positives too, like rising interest in Bitcoin after the March collapse of US banks and requests from big financial players to launch spot ETFs.
Despite all these factors, 2023 turned out to be its least volatile year ever, with a 30-day volatility of 41.5%. The previous low was 43.4% in 2016.
The ongoing bull cycle showed an unusually low drawdown, peaking at just 20%. In previous cycles, drawdowns ranged from 36% to 71%.
This decrease attracts more overall investment. Less drawdown and volatility mean investors are more willing to take risks on the asset when building their portfolios.
In 2023, funds poured $1.9 billion into crypto, with $1.8 billion (95%) in the last two months.
While the drop in volatility wasn’t the sole reason for increased investment, it further boosts the interest of major players in diversifying with crypto.
Cryptocurrencies involve complexity and carry a high risk of rapid monetary loss due to volatility and changing regulatory landscape. It’s crucial to ensure you understand how cryptocurrencies operate and can withstand the potential high-risk scenario of losing your assets.
This campaign is not region-specific and should not be interpreted as an invitation to engage in cryptocurrencies operations.
