Bitcoin’s Volatility Drops to Lowest Since 2020 While AI Tokens Take Off

The typically hyper-volatile Bitcoin hasn’t been so choppy of late at all.

(Bloomberg) — The typically hyper-volatile Bitcoin hasn’t been so choppy of late at all.

The largest digital asset hasn’t posted a daily move of 6% for 70 sessions, the longest streak of calm since October 2020, data compiled by Bloomberg show. And the coin is on pace for a slight loss in May after gaining each of the first four months of the year. 

It’s an uncommon stretch of torpor for Bitcoin, which is known for typically posting large up or down moves, which it then sometimes reverses just a day later. Market-watchers attribute the muted moves to a confluence of events, including that there’s a number of unresolved political and monetary-policy-related events that could have an impact on prices but have yet to be resolved. 

“There are a few macro catalysts playing out right now — whether debt-ceiling negotiations or the Fed rate policy, traders are waiting for more clarity,” said Strahinja Savic, head of data and analytics at FRNT Financial. “It’s just a wait-and-see-type of moment.” 

US politicians have been wrangling over a resolution to an impasse on the debt ceiling, the process for which has been dragging out. Meanwhile, minutes from the most-recent meeting of Federal Reserve officials showed that policymakers said they were uncertain about how much additional policy tightening might be needed on their end to help continue to slow inflation in the US. 

It’s a strange stretch for Bitcoin, one of whose most-recognizable characteristics over its lifespan has been its wild trading. The cryptocurrency has also been trading in a narrow range, hovering around $27,000 for three straight weeks. In fact, in the week through Monday, it had traded within a 3.4% range of between $26,600 and $27,500, “one of the tightest trading ranges over the last few years,” according to analysts at Glassnode. That’s also happened alongside “extremely light” on-chain volume, while large swathes of the coin supply have remained dormant in investor wallets, the researcher said in a note. 

Bitcoin rose 1.1% to $26,781 as of 12:17 p.m. in New York. It rallied more than 70% in the first four months of the year, after tumbling 64% in 2022. Bitcoin reached a record of almost $69,000 in November 2021.

To be sure, not all corners of the crypto market have been lackadaisical. A slew of tokens classified under the AI category by CoinGecko are on pace for big gains this week — with some surging more than 80% — as the artificial-intelligence theme made waves after Nvidia Corp. said it’s benefitting from its bet on the new tech. Still, analysts have called these types of tokens “faddish.” 

Meanwhile, Bitcoin’s 30-day volatility is sitting at lows not seen since early January, according to K33’s Bendik Schei and Vetle Lunde. The pair found that its “ever-declining volatility” is also reflected in the options market — six-month options expiries are trading at an implied volatility of 46, “considerably below” the previous all-time low of 50.3. 

While the upside potential for Bitcoin could be significant even on a risk-adjusted basis, there’s just not enough of a compelling reason for investors to pile into crypto right now, according to Noelle Acheson, author of the “Crypto Is Macro Now” newsletter. There’s also not much reason for current holders to sell, she added, and the macro background has investors waiting to see how things play out. 

“There could be some downside, but conviction in this is not strong enough to offset the possibility of missing out on any rally,” she said. “Obviously, there is some buying and selling going on, but it is not enough to boost volatility, despite the low volumes and liquidity.”

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