Bitcoin’s volatility is on a downward trajectory. Research shows that over the last 6-months, its volatility has stabilized at around 73%. According to a JP Morgan strategist, this is an indicator that the crypto asset is maturing and that its price movements are now trending towards normal, just like traditional asset classes.
While this may sound negative to retail investors that ride on its mega pump and dump waves, it is actually a good thing for the crypto’s long-term growth and stability. That’s because it will make it more attractive to institutional players. To understand this, you need to think like a hedge fund, a pension fund, or any other multi-billion dollar financial institution.
These are institutions that invest billions of dollars of people’s money and have to be careful where they put their money. For context, it would be foolhardy for a pension fund to pump billions of dollars of people’s pension into an asset that can drop by over 60% in a few months. The reduced and normalizing volatility of Bitcoin will make it attractive to such players.
Analysts are also quite bullish on Bitcoin’s continued divergence from traditional assets. According to JP Morgan Strategists, Bitcoin is increasingly showing a divergent correlation with traditional markets. This makes it highly attractive as a hedge against traditional asset classes. Also, this explains the growing demand for Bitcoin ETFs. Goldman Sachs and Fidelity have already applied for approval to launch such ETFs. All this is so bullish that JP Morgan believes Bitcoin could take Gold’s place as a store of value.