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ETFs drive Bitcoin volatility to record low in sign more will hold long-term

ETFs drive Bitcoin volatility to record low in sign more will hold long-term
Credit: Andrés Tapia
  • Bitcoin’s 12-month volatility is the lowest on record, analysts say.
  • US Bitcoin spot ETFs are expected to continue smoothing the asset’s price fluctuations over a longer time frame.

Bitcoin is becoming calmer. It’s a trend that will entrench itself as US exchange-traded funds proliferate.

Bitcoin volatility is down

Bitcoin’s 12-month annualised volatility has hit its lowest levels in 12 years, according to Charlie Bilello, chief market strategist at wealth management firm Creative Planning.

While there are fluctuations year-to-year, the overall trajectory shows a decline from a high of 179% in January 2012 to 45% in January 2024, according to Bilello’s data.

Volatility has been a hallmark of the asset class since inception, drawing investors eager to leverage its fluctuations for potential gains and simultaneously deterring those averse to risk.

Bitcoin’s 12-month annualised volatility serves as an indicator, reflecting the extent of the crypto’s price fluctuations over a year-long period.

A higher percentage denotes greater price variability, signalling increased market unpredictability, while a lower figure suggests more stable trading conditions.

“Less volatility could mean more long-term holders,” Bradley Park, web3 analyst at onchain analytics firm CryptoQuant, told DL News.

Appearing on Peter McCormack’s “What Bitcoin Did” podcast earlier this month, Alex Thorn, head of firmwide research at Galaxy Digital, and Bloomberg Intelligence ETF analyst James Seyffart said the introduction of US spot Bitcoin ETFs will further dampen volatility.

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“A huge amount of it [Bitcoin] will sit in adviser accounts. They don’t want to trade every day,” Thorn said.

Seyffart agreed, saying advisers with set target portfolio allocations would slash volatility while increasing fund returns.

Over time, the value of assets in a portfolio changes due to market fluctuations. This can cause the actual allocation of an asset within a portfolio to drift away from its target.

For example, if Bitcoin’s value increases significantly, it might comprise a larger percentage of the portfolio than intended, triggering rebalancing that’s typically conducted quarterly or annually.

If the portfolio, for example, has a target allocation of 5% and Bitcoin surging by 80%, then advisers are likely to be selling their assets to avoid the cryptocurrency getting an outsized share of the portfolio, Seyffart said.

If Bitcoin “tanks 80% they’re going to be buying it to get it back to whatever their allocation is. They’re going to try to keep that allocation at 5%,” Seyffart said.

Crypto market movers

  • Bitcoin is up 0.48% in the last 24 hours as of 11.50pm GMT, trading at $42,236.
  • Ethereum rose 0.43% in the same period, now at $2,266.
  • Avalanche and Solana are down 3.43% and 1.22%, respectively.

What we’re reading

Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at

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