Bitcoin (BTC), Cryptocurrency, Stock Market–Last week EWN reported on the development that tech sector stocks, on average, exhibited more price volatility through the traditional markets than Bitcoin. As Bitcoin price volatility continues to reach an all time low, as the currency enters another week of largely sideways trading, the U.S. S&P 500 is now more turbulent in valuation than the number one cryptocurrency by market capitalization.
On Nov. 2, Bloomberg reported that Bitcoin had officially achieved lower price volatility than Standard & Poor’s 500 Price Index, a collection of a large market capitalization companies that have traditionally been useful for gauging the health of the broader market. According to Bloomberg, the ten-day historical volatility for the index is hovering around 27, compared to 15.7 for that of Bitcoin. While Bitcoin managed to surpass tech stocks last week in terms of lowering relative price volatility, this week’s development is promising news for cryptocurrency advocates that are hoping for BTC to become a more viable source of digital tender. In addition, the dropping price volatility for Bitcoin–while only fleeting at present–combats one of the most common criticisms made against the currency by economists, predicting that few average consumers are willing to transact in a tender that fluctuates day to day in value.
According to the Bloomberg report,
“U.S. stocks resumed their slide Friday, ending a three-day advance amid renewed concern on trade. White House economic adviser Larry Kudlow earlier said he’s “not as optimistic” as he once was for a China trade deal, pouring cold water on a report that President Donald Trump has asked officials to draft terms for a deal with China’s Xi Jinping.”
While the traditional stock market has been on an almost unprecedented bullish run, analysts are beginning to turn sour on the prospective outlook. Two weeks ago JPMorgan published a model predicting a 60 percent chance of recession occurring by 2020, with that number climbing to 80 percent within the next three years. Tech stocks, which have historically outperformed the market over the last decade, are now being hit the hardest in the subsequent market reversal, with even blue-chip stocks failing to inspire enough confidence in investors to stave off short term volatility.
While Bitcoin is down over 60 percent since achieving an all time high of $20,000 in December 2017, a bullish return for cryptocurrency could be on the horizon, particularly if the traditional stock market falters. The advent of a Bitcoin Exchange-Traded Fund, which is being eye for a launch in 2019, combined with the onset of institutional investing could be the catalyst to renew a bullish sentiment towards cryptocurrency. As stocks become a less attractive asset relative to cryptocurrency, the market for Bitcoin should receive the largest benefit.
In the interim, Bitcoin’s image continues to improve in light of the dropping price volatility. While current investors benefit the most from the wild price appreciation of Bitcoin, such as the bullish run to end 2017, BTC also benefits from low price volatility and periods of trading sideways. As a currency, the digital tender becomes more viable when the day to day price remains stable. As many economists have been quick to point out, the massive fluctuation in BTC valuation has made for an unattractive currency in the eyes of many consumers, therefore failing to fulfill its potential in transacting.