Bitcoin and the crypto world that revolves around it started the year with a bit of a snooze compared to last year’s relatively bumpy roller coaster along the market.
According to statistics provided by Yahoo Finance, Bitcoin’s value has deviated above the standard deviations of the mean only five times up or down in price, which is less than half of what we saw in early 2017. The Nasdaq 100 index, on the other hand, showed in the 12 deviations so far this year. Since the beginning of the epidemic, this kind of phenomenon where stock market fluctuations surpassed those of cryptocurrencies has only happened once, and that was in 2020.
Concerns about how hard the government and federal reserves must work to tighten their policies to address decades-long inflation have spurred historically high volatility in high-value tech companies. According to Matt Maley of Miller Tabak & Co. Bitcoin did not suffer as much as other cryptocurrencies because of the high level of leverage that was removed from the market during Bitcoin’s 50% decline between November and mid-January.
Maley, senior market strategist at the company, claimed that at its lowest, Bitcoin lost 50% of its value, while the Nasdaq 100 shares lost approximately fifteen percent at the worst point. For the big stocks within the Nasdaq 100, it seems obvious that due to higher leverage, market volatility can be much more aggressive.
In 2022, the stock market has dropped over 13% so far, outpacing Bitcoin’s drop of approximately 8%. Despite fewer trading days, the technology-biased index has proven to be more active than crypto and BTC in terms of volatility since the beginning of this year. (Although stock market trading is limited to certain timeframes, cryptocurrency can be traded anytime and any day of the week using trading platforms such as Xcoins and many more).
Both asset groups are still closely linked. According to Bloomberg In statistics, Bitcoin has a coefficient that correlates with the Nasdaq 100 and is approaching the highest ATH we have seen before.
Risk aversion appears to have been permanently altered by the violent Bitcoin sell-off in January, which dropped values to $33,000. According to a study by CryptoCompare, trading volume at cryptocurrency exchange companies dropped more than 30% in January.
It is possible that decreasing volatility and trading volume could be difficult for those fueling cryptocurrency markets, as it is a market where volatility is one of the main attractions. According to Juthica Chou, head of trading at Kraken, Bitcoin’s rally in 2017 was fueled by the fact that stocks were quite monotonous. Unlike Bitcoin’s 92 standard deviation swings in 2017, the Nasdaq 100 had only 11.
According to Chou, head of OTC options trading at Kraken, there will be a reduction in the amount of money allocated to cryptocurrencies if there is an opportunity in the broader market. A significant technology business in terms of market capitalization, this is what Bitcoin really is.” Some of these larger, high-frequency companies may not make the profits they are looking for.”