Many individuals have been cautious about getting involved in cryptocurrency due to its well-known volatility. The entire market is susceptible to frequent price swings, primarily because it is still in its early developmental stages. Bitcoin (BTC), despite achieving a relatively stable position compared to other cryptocurrencies, has also experienced its share of ups and downs.
After a tumultuous 2022, the current year is showcasing a significant level of stability for the leading cryptocurrency. It seems that 2023 is shaping up to be more than just that. According to a recent report, 2023 is emerging as the least volatile year for Bitcoin in the last decade. Although the year isn’t over yet, its performance has remained relatively steady so far.
As illustrated in the chart, Bitcoin has seen fluctuations in volatility over the years. Several monthly average volatility measurements for BTC have surpassed the 100% threshold. The most recent instance of this occurred in 2020, with the highest volatility recorded in March. In contrast, August experienced the lowest level of price fluctuations. As of the present moment, BTC’s volatility stands at 35.43%.
Throughout the year, BTC reached its peak at $31,446 in July, while its lowest point was in January when it was valued at approximately $16,500. At the time of writing, BTC was trading at $25,699.68, indicating a 1% decrease in its daily value.
Exploring the Drivers of Bitcoin’s Price Volatility
Numerous elements contribute to the price fluctuations observed in Bitcoin. These encompass factors such as investor sentiment, government regulations, media attention, and the interplay of supply and demand. The market value of Bitcoin is fundamentally shaped by the quantity of coins in circulation and the degree to which individuals are willing to invest in it.
Additionally, Bitcoin has witnessed a decrease in its network activity. The actual trading volume, which represents the total volume on exchanges without accounting for wash trading activities, has experienced a substantial decline this year. Currently, the genuine trading volume of BTC stands at $1.43 billion, indicating an 88.39% decrease over the past year. Similarly, there has been a noticeable reduction in the number of active addresses in comparison to figures from the previous few years.
This recent decline can be interpreted from both optimistic and pessimistic perspectives. On the positive side, it suggests that Bitcoin may be maturing, becoming less susceptible to extreme price swings. Conversely, from a negative standpoint, a prolonged period of low volatility might imply that significant upward movements are becoming less likely to occur.