Volatility indicators show that investors expect smaller short-term fluctuations in Ethereum compared to Bitcoin (BTC), reversing the usual pattern for the two largest digital assets in the cryptocurrency space.
Less Fluctuations Expected in Ethereum Compared to Bitcoin (BTC)
The T3 Ethereum Volatility Index, a measure of 30-day fluctuations, has been following a similar indicator for Bitcoin since almost 2021. Typically, the Ethereum index outperforms the Bitcoin index.
In other words, this means that when the market moves in the coming period, calmer movements can be expected from Ethereum compared to Bitcoin.
“Lower volatility often helps institutional investors allocate more capital to crypto, as it becomes cheaper to buy protection and manage risks,” said Caroline Mauron, co-founder of crypto derivatives platform OrBit Markets.
“The volatility spread compression could make long-term investors invest more in Ethereum.”
Cryptocurrencies like Bitcoin and Ethereum partially recovered from a devastating crash such as the collapse of the FTX exchange in 2022.
The revival, however, has stalled recently due to reduced liquidity, a backdrop that could signal the limits of investor enthusiasm, in part due to US pressure on digital assets.
Still, the convergence in the volatility profiles of Bitcoin and Ethereum is questionable, according to Noelle Acheson, author of Crypto Is Macro Now.
“Ethereum is a newer asset with a lower market cap and greater technological and regulatory risk,” Acheson wrote, adding that the U.S. Securities and Exchange Commission continues to decline to say whether it considers the token to be a security subject to the agency's rules.
*Not investment advice.