Ethereum Volatility Slumps to Lower Levels than Bitcoin as Trading Volume Dips


Key Takeaways

– Volatility has increased in the last two weeks but is still low compared to the usual levels.
– Ethereum’s realised volatility is now lower than Bitcoin’s.
– Low trading volumes are a major reason for the lack of volatility.
– August saw the lowest trading volumes since October 2020.

Ask anyone to describe the cryptocurrency market, and chances are they will use the word “volatile”. This asset class is well known for its sharp price movements, however, this year has been different. Despite Bitcoin registering a 55% increase since the start of the year, the rise has been slow and steady rather than sudden jumps.

The volatility, measured annually over a rolling 30-day window, shows this. Although there has been an increase in the last two weeks, it is far below the expected level. It should be noted that 30s volatility is still high when compared to other asset classes, so Bitcoin is not stable. However, it is still unusual when compared to Bitcoin’s past.

A comparison of Bitcoin’s and Ethereum’s volatility shows the placid nature of the crypto market. Bitcoin usually leads the crypto market, and altcoins tend to follow it. Ethereum is now too large to qualify as an altcoin, however, it has tended to display higher volatility than Bitcoin. This gap has decreased in 2023, and Ethereum’s realised volatility is now lower than Bitcoin’s. This has happened four times this year, but the gap usually reverts back.

Low volatility and trading volumes go hand in hand. Exchange volume in August was $423 billion, the lowest since October 2020. This is far lower than the $2 trillion volume seen at this time last year.

ETFs, macro clarity, and sentiment pickup will help increase volatility and volume. The fourth halving is coming up in April 2024, however, its effect remains to be seen. For now, volatility and volume are both much lower than expected.

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