- The lack of external catalysts forced top cryptos to stick to their limited reach.
- Experts said the silent phase can be used for industry innovations.
The fiercest critics of the high volatility of cryptocurrencies may find it difficult to tolerate the continued dynamics of the market. For the uninitiated, the crypto market has shown more stability than the oil market as of August 16.
👀📈#BTC And #ETH 90 days #volatility just dropped to multi-year lows of 35% and 37% each, making them less volatile than oil at 41%.🤔🗓️ pic.twitter.com/VMfTW53goG
— Kaiko (@KaikoData) August 16, 2023
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According to data provider Kaiko, the 90-day annualized volatility for Bitcoin [BTC] and Ethereum [ETH] plummeted to multi-year lows of 35% and 37% respectively. This made them less volatile than the ‘black gold’, which was 41%.
Digital gold vs black gold
The two largest cryptos by market cap have remained glued to narrow trading ranges, with no directional break from the gains made during the last meaningful rally in June, according to Glassnode.
Source: Glassnode
The June rally was built on the hype around TradFi interest in digital assets. However, things haven’t progressed any faster since then. The US Securities and Exchange Commission (SEC) has extended the deadlines for several spot ETF approvals to 2024 as the regulator puts crypto instruments under strict scrutiny.
The slowdown sparked fears among participants, with both BTC and ETH recording week-to-date (WTD) losses of more than 3%.
On the other hand, ongoing supply constraints have caused benchmark crude oil indices such as the Brent Crude and the West Texas Intermediate (WTI) to skyrocket. Since mid-June, Brent Crude is up more than 12% to its value of $83.61 at the time of writing, according to To invest. com.
WTI was up 15% in the same time period.
Source: Investing.com/Brent Crude
The dip in crypto asset volatility can be attributed to a shrinking supply of liquidity, i.e. the number of tokens available for buying and selling. BTC and ETH reserves on exchanges hit multi-year lows at the time of writing.
Source: Glassnode
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What does low volatility mean for the market?
Gracy Chen, Managing Director at crypto exchange Bitget, said the drop in volatility could have serious consequences for the crypto industry, saying:
“Lower user demand is leading the entire industry to shrink profit margins, resulting in employee layoffs and the transition of blockchain workers to other industries. External capital inflows are slowing significantly and the industry is entering a period of decline.”
However, she added that the quiet phase offers an opportunity for further innovation in the industry as developers can better focus on building products according to the needs of the market.
Her view was echoed by Iakov Levin, co-founder of the decentralized asset management platform Locus Finance. He stated that the market was in a sort of rebuilding phase after the 2022 carnage and acknowledged:
“Right now is where the industry is focusing on building and laying the groundwork for years to come as we enjoy quiet times. It is not an interesting period, but it is the most important in the development of the industry.”