Bitcoin (BTC) has long been viewed as a highly volatile asset, but its volatility is falling and will continue to do so as the cryptocurrency matures, Fidelity Digital Assets said in a research report on Wednesday.
“New assets typically take time to undergo price discovery, maturation and then settle into lower volatility,” analyst Zack Wainwright wrote, noting that even gold exhibited high volatility when the U.S. abandoned the gold standard in the 1970s.
Bitcoin has already shown signs of maturation in its 15 years of existence and the volatility has reached new all-time lows on a yearly scale, the report said.
“There is a clear downward trend in volatility for bitcoin over its lifetime and we believe this trend will continue as bitcoin continues to mature over time,” Wainwright wrote.
Bitcoin is currently less volatile than 33 of the S&P 500 companies and was less volatile than 92 of the stocks in the index as recently as October 2023, when using 90-day realized historical volatility figures, Fidelity said.
Over the last two years the cryptocurrency has been less volatile than Netflix (NFLX), and when compared with the “magnificent seven,” a group of high-performing stocks, “bitcoin’s volatility does not appear as an outlier,” the report noted.
As is the case with all emerging asset classes with a small market cap, the cryptocurrency is more likely to experience higher volatility due to new capital flows, the note said. “However, as the asset class matures and its total market cap grows, the inflow of capital is expected to have a smaller impact because it will be flowing into a larger capital base.”
The approval of U.S. spot bitcoin exchange-traded funds (ETFs) in January and the ensuing inflows were predicted to damp the cryptocurrency’s volatility. Still, the cryptocurrency fell over 16% last month.
“New capital inflows will not move the market or the marginal buyer or seller as much,” the report added.
Read more: Bitcoin Could Drop Further to as Low as $50K, Standard Chartered Says
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