Bitcoin Hits Record Low Volatility: Investors await Federal Reserve’s Move
Bitcoin hits record low volatility as traders eye Federal Reserve's next move.
Bitcoin has seen minimal price changes for the fourth week in a row, marking its lowest level of volatility, or price swings, since the start of the year.
Bitcoin's 30-day estimate, which measures price changes over a month, has dropped to just 0.74%**, the lowest since January 16, according to data from 99Bitcoins.
Volatility in Bitcoin refers to how much the price changes each day. Higher volatility means the price can change more unpredictably, making it a riskier investment.
T3I's BitVol Index, which tracks 30-day expected price swings for bitcoin, and the CVI’s Crypto Volatility Index, similar to the S&P 500's VIX index and measuring bitcoin and ether (ETH), have also fallen to their lowest levels.
Implied volatility is a prediction of future price changes, while realized volatility measures past price changes.
Cryptocurrencies like Bitcoin and Ether often see daily price changes of 5%-10%, though recent months have seen quieter trading. These digital currencies have been trading within a specific price range since last month after Blackrock's filing for a Bitcoin ETF caused a more than 15% rise in Bitcoin's price.
Lower volatility suggests that crypto investors are patiently waiting for new developments. They are watching how traditional financial markets will react to the expected increase in interest rates by the Federal Reserve, the US central bank.
Higher interest rates mean that borrowing costs more, which could make volatile investments like cryptocurrencies less attractive. Conversely, lower rates could encourage more risk-taking.
This expected increase in interest rates comes despite a slower rate of inflation, or the increase in consumer prices. Some prices have gone down, but others, like food and housing, have increased.
The Federal Reserve is keeping an eye on wage gains. If wages rise significantly, it might be difficult to control inflation. But this hasn't happened yet, according to Deloitte’s chief global economist, Ira Kalish.
