Bitcoin and Ethereum's Climb to New Heights: A Steady Advance Towards Market Stability
Summary:
Bitcoin (BTC) had an impressive February, breaking the $50,000 mark. Predictions placed BTC at $100,000, but these conjectures are largely based on speculative excitement. A thorough analysis shows that the forthcoming period may bring more temperate price action, predicting a toned-down 2024 compared to the ecstatic 2021. Bitcoin and Ethereum's volatility have been on a steady decline, indicating growing market steadiness set to continue in the long term. The climb towards respective targets of $100,000 for BTC and $10,000 for Ethereum will likely be gradual as stability gradually replaces volatility.
There's no question that Bitcoin (BTC) had a spectacular February, with its price soaring past the $50,000 mark, a milestone that would have made even the most reserved investors a tad buoyant. The positive sentiment was so strong that the January CPI report's 2% drop barely made a dent. This prompted comparisons to the 2021 bull run and a new wave of predictions placing BTC at a staggering $100,000. However, a healthy dose of skepticism is advisable, as the current surge seems mostly driven by speculative excitement. A thorough analysis indicates that the forthcoming period may bring more of the drab price action that we've been witnessing lately, suggesting a different 2024 than the ecstatic one in 2021.
Concerning the appeal of the round numbers in the market, it's even more pronounced in the crypto world, notorious for its exaggerated tendencies. February 9 witnessed two noteworthy numerical landmarks. Firstly, the often-discussed Bitcoin spot ETFs, the supposed entry point for traditional finance institutional investors into cryptocurrency, touched the impressive $10 billion mark in less than a month of trading. Simultaneously, the S&P 500, a major representative of the tech and finance sectors, hit a historic peak of 5,000 points. However, a deeper delve into these price fluctuations tells a more nuanced story.
Preceding the recent BTC surge, its trading spectrum was limited to a moderate 1-2% range. On a superficial level, it could be argued that the market's caution stemmed from regulatory uncertainties such as the SEC's indecisiveness over BTC spot ETFs, the classification of Ethereum (ETH) as a security or a commodity, and the Federal Reserve's hesitancy to slash interest rates. Yet, this perspective doesn't capture the full picture. If we review the historical volatility of Bitcoin, a pattern of growing steadiness emerges. This trend sharply contrasts the tumultuous swings of the last bull cycle and seems set to persist.
For Bitcoin and its closest rival, Ethereum, the volatility has been on a steady decline. While BTC's volatility hovered above 100% weekly and even touched 140% in 2021, it has largely remained under 60% in the past year. Ethereum mirrors this pattern, albeit at higher range extremes. Fluctuations for both have been more muted on a monthly scale, averaging between 30% and 50%, and even lowering to the twenties at times.
While 'low,' 'moderate,' or 'high' volatility depends on various factors, including prevailing market conditions, assets under consideration, and individual risk appetite, a range between 10% and 30% is generally deemed moderate. Apple's stock, a staple in this category, bears witness to this. While comparing Bitcoin and Ethereum to Apple's stock is premature and could invite contrasting criticisms, the descent of their volatility toward moderate ranges suggests that we're steadily heading in that direction.
This doesn't mean that BTC and ETH won't reach the respective targets of $100,000 and $10,000 within this year. However, the climb will likely be gradual rather than sudden as stability gradually replaces volatility. So, as appealing as the bullish sentiment may have been in recent days, it's pertinent to adopt a measured view of current trends instead of getting carried away with unfounded predictions. For Bitcoin and Ethereum, the path forward is marked by a newfound normalcy dictated by consistently modest price movements.
(Article written by Lucas Kiely, CIO at Yield App. Please note that the opinions are that of the author alone and not reflective of Cointelegraph's position. This write-up is for informational purposes and should not be perceived as legal or investment advice.)
Published At
2/19/2024 2:25:21 AM
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