Cryptocurrency investor and analyst Anthony Pompliano said that Bitcoin's high volatility, which has long made it attractive to investors, has decreased markedly in recent years.
Pompliano discussed the potential impact of this change on the market, citing comments from Bloomberg's Eric Balchunas, analyst Mitchell Askew, and investor Joe Burnett.
According to Balchunas, volatility has fallen sharply since the launch of spot Bitcoin ETFs. The 90-day average volatility has fallen below 40 for the first time, compared to over 60 when the ETFs launched. Bitcoin's volatility used to be three times that of the gold ETF GLD, but now it's doubled.
Mitchell Askew argues that this decline has transformed Bitcoin into two distinct assets: “pre-ETF” and “post-ETF.” He argues that the harsh bull and bear cycles of the past will be replaced by “pump-consolidation” cycles, which could dampen investor interest in the short term.
Balchunas agreed with Askew, saying that lower volatility attracts the attention of large institutional investors and increases Bitcoin's chances of adoption as a currency. However, he added that this also means an end to massive price jumps.
Meanwhile, Joe Burnett, noting that declines in volatility have historically preceded long-term surges, suggested the current period could be the start of a new explosive surge. According to Burnett, governments, major exchanges, and institutional portfolios are still very low-invested in Bitcoin, creating potential growth space.
Pompliano stated that Bitcoin's volatility could continue to decline over the long term as the market matures and the share of traditional financial investors increases, but that the asset could re-experience high volatility at unexpected times. He noted that high volatility creates opportunities for investors and is important for Bitcoin's promotion, adding, “I hope volatility doesn't disappear completely.”
*This is not investment advice.
