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Bitcoin a Stable Investment? Volatility Dips Below Nasdaq, S&P 500

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  • Overall, cryptocurrencies are less responsive to exposure of sensitive economic data
  • Indices that track the S&P 500 and Nasdaq price movements are both up this year

A silver lining to Bitcoin’s recent flat trading is that the cryptocurrency is in uncharted territory. Bitcoin volatility is relatively low compared to the stock market.

Bitcoin’s volatility has fallen below both the Nasdaq and S&P 500 stock indices for the first time since 2020, according to Kaiko data. today, Bitcoin volatility It is down more than 40% from its most volatile point ever in February this year.

On Tuesday, Cboe’s Volatility Index (ticker VIX), a measure of price volatility for the S&P 500, was just below 30. The VIX is up nearly 13 basis points year-to-date.

The Nasdaq 100 Volatility Index (ticker VOLQ) is also up so far this year. We’ve seen an increase of over 90% so far.

Bitcoin Realized Volatility (Annualized) | Source: Zero Cap

“In the first half of 2022, cryptocurrencies were highly sensitive to macro market events, including inflation data releases, interest rate hikes and stock market volatility,” said Clara Medalley, head of research at Kaiko. . “Bitcoin’s correlation with the Nasdaq and he S&P 500 hit a record high in the spring when global financial markets entered a period of high volatility.”

Cryptocurrencies as a whole generally low reactivity Medalley added that the release of sensitive economic data could explain the overall lower volatility compared to the stock market.

Bitcoin’s correlation to the S&P 500 has hovered between 0.5 and 0.6 over the past three months. historical databut traders hope digital assets will start to distance themselves from equities.

“Probably ‘Digital Gold’ [bitcoin] Pantera Capital Chief Executive Officer and Co-Chief Investment Officer Dan Morehead wrote in a note Tuesday. “In a 42-year rising interest rate environment, as the Fed undoes two of its mistakes, there will be a desire to invest in things that don’t need to keep going down.”

Next month’s Federal Reserve interest rate decision could bring new volatility to cryptocurrencies, but traders are generally optimistic about Bitcoin for the foreseeable future.

“We see value in bitcoin at these levels. Either it can be a hedge against geopolitical and macro uncertainty or it can be reconnected as a high-beta asset,” said co-founder of digital asset firm Zerocap. Jon de Wet, Chief Investment Officer and Chief Investment Officer.

Bitcoin tends to be inversely correlated with movements in the US Dollar Currency Index (DXY), which has been on a strong upward trend since March. While that long-term trend holds, the dollar’s momentum has slowed recently as it pulls back to test the support area between 110 and 111, which coincides with the 50-day moving average.

Daily DXY | Source: TradingView

Risky assets could benefit if the dollar turns lower.

“One thing is certain, volatility tends to mean undoing. Any long-term volatility strategy is worth a look,” he said.

In other words, the prolonged contraction in volatility that cryptocurrency markets have experienced in recent months is likely to give way to an increase in volatility at some point. The longer the up or down movement can be more powerful.


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  • block works

    senior reporter

    Casey Wagner is a New York-based business journalist covering regulatory, legislative, digital asset investment firms, market structures, central banks and governments, and CBDCs. Prior to joining Blockworks, he reported on markets for Bloomberg News. She graduated from the University of Virginia with a degree in Media Studies. Email Casey. [email protected]

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