Bitcoin {{BTC}}, the leading cryptocurrency by market value and trading volumes, is supposed to be relatively steady compared to other digital assets, protecting a trader’s portfolio from wild swings in the broader market.
However, bitcoin has been more volatile than ether {{ETH}} recently.
Bitcoin’s annualized 30-day historical or realized volatility rose to nearly 60% late last week, surpassing ether’s 30-day realized volatility by nearly 10 percentage points. That’s the highest spread in at least a year, according to data tracked by Paris-based Kaiko. Historical volatility indicates the degree of price turbulence observed over a specific period.
The bitcoin-ether volatility spread flipped positive weeks after the U.S. Securities and Exchange Commission (SEC) greenlighted nearly a dozen spot bitcoin exchange-traded funds (ETFs), allowing traders to take exposure to the cryptocurrency without owning it.
Since then, traders have been squarely focused on the activity in the spot ETFs, with net inflows breeding upside volatility in bitcoin and the broader crypto market. In the meantime, the dwindling probability of the SEC approving an ETH ETF by May seems to have demotivated ether traders.
Bitcoin blockchain’s upcoming reward halving, a quadrennial event that reduces the pace of per block BTC emission by 50%, could be another reason for relatively higher volatility in the cryptocurrency.
On April 21, the inbuilt code will reduce the per-block reward paid to miners to 3.125 BTC from 6.25 BTC, halving the miner’s revenue, which, as per ByteTree, is currently at $26 billion annually.
The consensus is that halving is bullish as it halves the pace of supply expansion, creating a demand-supply imbalance in favor of a price rise, assuming the demand side remains unchanged or strengthens. Bitcoin chalked out stellar rallies, setting new record highs over 12-18 months following the previous halvings, which occurred in November 2012, July 2016, and May 2020.
What’s different this time is that bitcoin has surpassed the previous bull market peak of around $69,000 weeks ahead of the halving, which makes the upcoming event all the more exciting for traders.
IMPORTANT VOCABULARIES:
- Assets: Things of value that a person or company owns, such as money, property, or investments.
- Portfolio: A collection of investments held by an individual or entity.
- Swings: Sudden and significant changes or fluctuations in value, usually in reference to financial markets or prices.
- Volatile: Describes something that is highly unstable or prone to change rapidly, often used to describe financial markets with unpredictable fluctuations.
- Surpassing: Going beyond or exceeding something, often used to describe achieving a higher level or surpassing a previous record or expectation.
- Turbulence: A state of disturbance or instability, often used in the context of the economy or financial markets experiencing chaotic or unpredictable conditions.
- Flipped: Reversed or turned over, often used to describe a sudden change in direction or outcome.
- Exposure: The degree of risk or vulnerability to which an individual or entity is subjected, often in reference to financial or environmental risks.
- Owning: Possessing or having control or responsibility over something.
- Squarely: Directly or squarely facing a situation or issue, often used to indicate a clear or unambiguous focus.
- Inflows: The movement of money or assets into a particular place or system, often used in the context of investments or financial transactions.
- Dwindling: Decreasing or diminishing gradually over time.
- Demotivated: Feeling less motivated or enthusiastic about something, often due to setbacks or challenges.
- Consensus: General agreement or harmony among a group of people, often used in decision-making or policymaking contexts.
- Bullish: Optimistic or positive about the future direction of a market or asset, expecting prices to rise.
- Chalked out: Carefully planned or outlined in detail.
