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BTC price foregoes Santa rally as Bitcoin volatility hits record low

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BTC price foregoes Santa rally as Bitcoin volatility hits record low

volatility asset

BTC Price Forgoes Santa Rally As Bitcoin Volatility Hits Record Low

As 2021 quickly approaches, the Bitcoin market has yet to witness a “Santa Rally” that normally accompanies the holiday season. Moreover, Bitcoin’s price volatility has hit a record low, which has caused some traders to grow concerned about the direction in which the world’s most popular digital asset is heading.

Low Volatility Spells Trouble for Traders

Volatility is often seen as a measure of liquidity and stability of an asset and when the volatility is low, it can suggest that the Bitcoin market’s state is less than ideal. To be sure, Bitcoin’s price volatility rate hit a record low of 0.92% in November and has since reached as low as 0.48% in the first half of December.

Harbingers of a Potential Bubble

While analysts have asserted that this low volatility indicates the increasing maturity of the asset class, some investors fear that this may be a sign of a potential bubble that is building in the market. That said, the market’s recent sideways trend still has not yet been enough to quell investors’ deep-seeded worry that a bubble might be forming.

Symptoms of a Maturing Bitcoin Market

Notwithstanding the worry that a potential bubble may develop, low-volatility periods can also be seen as a sign of confidence in the asset class. Consequently, BTC’s record-low volatility does not necessarily constitute a sign of impending doom; instead, it can be viewed as a symptom of an increasingly mature digital asset ecosystem — one in which its global standing continues to rise.

Bitcoin’s Best Year Yet

It is important to note that BTC’s prices have still risen considerably in 2020, making this its best year of performance yet. With that said, some analysts have suggested that the asset’s price may still have more room to grow as the upcoming month is typically a seasonably strong one for the markets.

Final Thoughts

Although Bitcoin’s record-low volatility may bring worry to investors, it is important to remember that it could very well be a sign of an ever-maturing asset class. With December’s seasonably strong markets and ongoing institutional adoption, 2021 could still usher in a Santa rally that has eluded Bitcoin in the previous few weeks.

Key Takeaways:

  • Bitcoin’s price volatility has hit a record low in November as the Santa rally has yet to manifest
  • Low volatility can be seen as a sign of increasing maturity of the digital asset class
  • BTC prices have still managed to rise considerably this year, making 2020 its best year
  • There is still potential for a Santa rally as the year draws to a close

As the world starts to approach the end of 2020, Bitcoin volatility has plummeted to its lowest mark ever recorded, thwarting hopes of a “Santa rally” as BTC (Bitcoin) prices remain in a narrow trading range around $19,200. This movement makes this the least volatile on record since the world’s premier digital currency first took off back in 2017.

Cryptocurrency volatility, or the degree of price fluctuations seen in a given period of trading, is often seen as an indicator of investor sentiment towards the asset. Low levels of volatility generally indicate waning investor-confidence and decreasing interest in the asset.

Unfortunately for crypto traders, Bitcoin has failed to pick up momentum despite rallying earlier this month. The digital asset’s price went as high as $19,800 during the rally, its highest level since the beginning of the year. However, its 92-day volatility reached as low as 0.9 percent as of Sunday, according to data from Skew Markets.

In comparison, the 90-day volatility of the S&P 500 equities index was close to 13.3 percent, making Bitcoin the least volatile asset of the two. Moreover, its 30-day volatility hit 0.35 percent, the lowest ever since it went mainstream.

Despite not benefiting from the typical Santa rally seen in financial markets at the end of the year, Bitcoin’s performance this year has been extremely impressive. Its price has grown around 181 percent since the beginning of 2020, while the S&P 500 has shaved off 0.7 percent of its value.

Industry experts believe Bitcoin’s increasing use as a store of value could have contributed to its lack of volatility this year. They argue that the current investor interest in the asset is no longer driven solely by speculation, but rather by its safe-haven appeal and its ability to provide a hedge during times of financial instability.

With no signs of an imminent collapse in its price, investors remain optimistic that Bitcoin can end the year on a high note. What remains to be seen, though, is where the asset will go next and whether it can keep up its low-volatility streak in the coming months.

It still remains to be seen if Bitcoin will outperform traditional assets such as stocks, gold and bonds in 2021, but for now the digital asset has upgraded its status from volatility-heavy asset to low-risk store of value.

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