Top 5 Factors Contributing to Bitcoin Price’s Staggering Drop in Volatility
In the past 6 weeks, Bitcoin’s price volatility has been at a record low. In fact, the reduction in volatility in Bitcoin has reached a point where it seems to be less volatile than most tech stocks in the traditional market.
The recent daily volatility is just around $85 or less than 2%. Gone are the days when the top coin saw fluctuations of over $1,000 every day. The effect of this phenomenon has had lots of positive effects on the entire crypto ecosystem.
Given below are a few reasons why this stability or stagnation is happening, even when most traditional financial markets are facing a year high volatility.
Tether (USDT) is one of the prime examples of stablecoins not doing as well as people had anticipated. Experts had earlier said that Tether and the applications of stablecoins were causing the bitcoin markets to fluctuate, however, those estimates were greatly exaggerated. They have recalled over a billion coins burning about 500 million of them. The small affair with stablecoins seems to have died down.
Separation From AltCoins:
Earlier people, especially, the ones new to crypto ecosystems who viewed cryptos as an avenue to make money, couldn’t differentiate between altcoins and bitcoins. Now, since Bitcoin’s price remained steady when altcoins are failing, the critics are learning that they, in fact, are quite different and barely depend on each other. Now Bitcoins have recaptured over 55% of the entire crypto market.
Loss Of Enthusiasm:
Most people do not believe that Bitcoin will make skyrocketing gains any time soon. This loss of FOMO from amateur investors in the past months has kept the prices in check. However, there is still enough belief in Bitcoins to hold support levels close to $6,000.
Low Bitcoin Usage:
The use of the Bitcoin network is scarce for the past few months. Most of the funds are being used to move assets in exchanges. This can be attributed to investors being cautious and in a “saving mode” rather than using it as a payment method. The low usage rate is the result of strict or uncertain regulations against it. Back in the early days of Bitcoin, it was used as the currency of darknet. However, now, law enforcement officers can easily track down the wallets associated with illicit transactions. Moreover, privacy coins such as Monero have taken Bitcoins shares in doing such transactions.
The current returns on mining are pretty good and many cloud mining schemes are also making profits. The halving of reward will occur in two years, so until then the miners will be glad to support the operations. Miners are certainly reducing their production, owing to mining of other blockchains, but certainly, most of them are not dumping it.