Bitcoin Annual Volatility Hits Record Low

The annual volatility of Bitcoin, a measure of its price volatility, has hit a record low in 12 years, according to Charlie Bilello, senior market strategist at Creative Planning.

The volatility measure, which is calculated as the standard deviation of Bitcoin's price over 12 months, was 45% at the beginning of 2024. This is the lowest level since January 2012, when volatility was 179%.

A higher volatility measure means that Bitcoin's price can fluctuate significantly in the short term. A lower volatility measure means that prices are more stable and predictable.

Analysts attribute the decline in Bitcoin volatility to several factors. First, the market is seeing an increase in the number of long-term holders, who are not prone to speculation. Second, the launch of spot Bitcoin ETFs in the United States is expected to further reduce volatility, according to experts.

As Alex Thorn, head of research at Galaxy Digital, noted, spot Bitcoin ETFs will attract institutional investors to the market, who are not interested in short-term trading. This, in turn, will lead to lower volatility.

However, some experts note that Bitcoin-based exchange-traded products can also lead to increased volatility. For example, if the price of Bitcoin rises too quickly, institutional investors may start selling the cryptocurrency to reduce risk. This could lead to a sharp drop in prices.

Overall, the decline in Bitcoin volatility is a positive factor for the market. It makes cryptocurrency more attractive to institutional investors and could contribute to further price growth.