Erik Voorhees Comments on Bitcoin’s Lower Volatility Showing Signs of Being a Stable Currency
The prevailing Bitcoin volatility rate ranks the lowest among the averages reported for the digital currency over the past year. Nonetheless, the low rates are expected to be shot-lived, as many experts believe that normalcy will be reinstated within a short period.
According to data on CryptoCompare, the current volatility rates, standing at a meager 8.88%, are the lowest recorded since last year. In comparison, the minimum average since the beginning of the year has been 20%, with January rates surpassing the 30% mark.
After a surprisingly bullish Senate Committee hearing held in February, the volatility rates for bitcoin soared to a whopping 74%. Again, the rates rose rapidly from 10% to 29% after the price of Bitcoin fell by $1,000 at the beginning of June.
The Impact of Volatility
To the crypto community, low Bitcoin volatility rates has both its advantages and disadvantages. On the upper side, trading in the digital currency becomes significantly less risky. Contrariwise, the profits made from either savvy of speculative investments are likely to decrease. As a result, low volatility might encourage investors to abandon short-term speculative trades in favor of long-term investments into promising projects.
According to Erik Vorhees, the CEO of ShapeShift, low volatility is likely to be heavily criticized by the crypto community. However, this incident is beneficial to both short-term and long-term investments. Specifically, Erik stared that financial traders favor high volatility rates because of the corresponding high return margins. On the other hand, a majority of crypto users support low volatility rates as they indicate that a digital currency is stabilizing, making them a valuable alternative to fiat currencies.
For other established virtual currencies, the volatility rates are mixed. In the past month, the price of Ethereum has risen significantly. At the end of August, the ETH volatility rate was 50%, a figure that plummeted to 15% within a week. As of now, the rate is at 17%. On its part, the volatility of Bitcoin Cash has been soaring lately. This rise has been attributed to the successful stress taste that revealed that the BCH network can run over 2 million concurrent transactions without increasing the gas fees.
Will Bitcoin Regain Its Volatility?
The low volatility rates could be an indicator that investors might have finally established an accurate and agreeable value for Bitcoin. Typically, high volatility rates occur when the market is disrupted. For instance, the massive influx of new Bitcoin investors propelled the crypto’s value to nearly $20,000 at the end of last year. Despite the numerous bullish calls by leading influencers and investors, the Bitcoin market is yet to match the achievements of 2017.
Currently, investors can hope that the constant fluctuations in Bitcoin price are done with. Nevertheless, the ongoing low volatility trend might be short-lived, eventually ending in another increase in the value of the digital currency. This is partly because the market is presently recovering from the nosedive it underwent after the SEC stalled its decision over the Bitcoin ETF proposal by the CBOE. In this regard, Vorhees said that regardless of the longevity of a low volatility period, the price will most probably rise after the trend subsides. Erik added that in due course, volatility will diminish, but the current situation is just the beginning.
Albeit theoretically, many speculate that the value of digital currencies will stabilize when cryptos develop use cases in the real world. However, the utility of such coins is imperative before stabilization is realized.