The list of concerns about Bitcoin crowd around usage by mafia, less than universal acceptance and of course the shockingly big swings in price, the massive volatility. Well, in a rare period of calm, the September 15 to October 15 period saw shockingly aggressive moves in the US equity indices – S&P 500, and the Dow as well as Nasdaq Composite with the sell-off of tech and social media. And of all of these asset classes, believe it or not, Bitcoin was the one with less volatility. Mind you, the one day move when the Nasdaq Composite sold off was the biggest move in that index in the past seven years.
Bitcoin saw a rally of 1700 percent in 2017 followed by a 60 percent sell-off in 2018. However in just over a month, Bitcoin price has moved only 0.45%. We at Classiarius called this ecosystem the Wild Wild West of investments but with support from regulators, the cowboys are running. What does this low volatility mean?
This low volatility of an asset makes it that much more attractive to the more conservative investors such as life companies, pension funds and all types of asset managers. In short, these investors are mandated to trade safe and less volatile finance instruments as the have OPM – other peoples` money. Anything that potentially moves 20 to 40 percent in a month scares conservative investors who are looking for returns of 6 to 8 percent per year.
If other digital currencies start to trade in tight ranges and can be viewed as investment grade instruments, then the crypto market will find new life in the form of stable and trusted investors.