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Bitcoin’s volatility rates fall as daily returns move away from ‘extreme behavior’ territory

Akash Anand



Bitcoin's volatility rates slide as daily returns move away from 'extreme behavior' territory
Source: Pixabay

Bitcoin [BTC] has had a remarkable recovery since the start of the year, with significant positive growth in both price and market cap.

Analysis of the coin’s prices and returns show that Bitcoin’s volatility declined as monetization of the cryptocurrency increased. Since its inception, the cryptocurrency’s returns have been more evenly spread out, with daily returns shuttling between the ranges of negative 35 percent and a whopping positive 40 percent.

As the years have passed by, it was noted that Bitcoin’s volatility collated into smaller ranges, indicating a switch from extreme highs and lows to a calmer and controlled price movement.

Taking 2019 alone, the chart showed that the returns fell in the negative 10 to positive 10 range, a far cry from the previous lows and highs. The analysis suggests that the returns on the ‘king coin’ this year were mostly governed by the sideways movement carried over from the fag end of 2018.

The bear market’s influence was evident as the probability density of returns fell largely in the single digit area. We can use this data to make the case that Bitcoin today, is moving more and more towards the ‘store of value’ asset category, rather than being just a speculative trading commodity.

Despite the clamp being formed in terms of returns, Bitcoin has still managed to climb slowly and steadily on the price charts with some peaks providing more returns than mainstream commodities like gold and the S&P 500. Recent research stated that Bitcoin had significantly outperformed the S&P 500 in terms of long-term returns and risks attained.

The data stated that since 2013, any investment that comprised of 5 percent Bitcoin and 95 percent fiat currency gathered more returns and less risk than the S&P 500. Bitcoin’s case was made stronger when it as revealed that during the aforementioned time period, the cryptocurrency was affected by a maximum loss of approximately 5 percent, while the S&P 500 suffered a loss of 6 percent last year alone.

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ErisX goes all hands on deck to launch a Bitcoin Futures market




ErisX goes all-hands on deck to launch a Bitcoin Futures market
Source: Unsplash

ErisX’s CSO, Matt Trudeau, detailed the company’s four important plans for the future, which includes launching a spot market, to secure a Bit License, DCO, and to launch a futures market.

ErisX currently has a DCM contract, which is a Derivative Contract Market that allows ErisX to run a CFTC-regulated futures exchange. However, ErisX aims to get a DCO [Derivatives Organization], which will effectively allow it to run a CFTC-regulated clearinghouse. A clearinghouse would mean that ErisX can take control of the custody of the assets and clear and settled trades.

The CSO explained the benefit of this, stating,

“There is some efficiency for firms like producers [like mining companies]; if they need to hedge their inventory or need liquidity on a spot market, they could do that conveniently on a single platform. “

Trudeau added that from the “post-trade standpoint” and “the collateral management standpoint,” ErisX would have cash, crypto, and the futures, all stored in their clearinghouse. This would boost efficiency since it would be available for all customers under a single platform. The CSO added,

“… so there is some efficiency in terms of managing collateral, if you don’t have assets on  multiple platforms, it can all be in our clearinghouse.”

Apart from the aforementioned plans, Trudeau added that the crypto-industry needs to mature more and that ErisX plans to make a significant contribution to that. He added,

“The market is professionalizing and we think that in terms of what institutions are expecting from a trading/custody experience, we will bring some of the solutions to the market and that’s really the foundational pieces that they are looking in order to build their businesses on top of us.”

Apart from ErisX, LedgerX has also received a go-sign from the CFTC to settle Bitcoin Futures in Bitcoins. Other exchanges include Intercontinental Exchange’s Bakkt and Seed CX.

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