The Calm Crypto Market? Bitcoin Volatility Drops Despite Turmoil Elsewhere

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Cryptocurrencies, among the most volatile of financial assets, have fallen quiet even as turmoil has gripped stocks, bonds, commodities and traditional currencies.

Bitcoin has mostly traded about $6,500 in recent weeks, in contrast to last year’s manic rally and the steep plunge that followed this year. Enthusiasts hope muted swings could help cryptocurrencies, of which bitcoin is the largest, gain traction as a means of transaction.

Since Oct. 1, bitcoin has moved at least 2% on only three days. By comparison, bitcoin averaged daily moves of 5% in late 2017 and earlier this year, while frequently notching double-digit percentage swings.

Bitcoin’s recent action contrasts with more traditional markets. For instance, U.S. stocks in October suffered their worst month in more than seven years, and the S&P 500 has had four swings of at least 2% since the beginning of last month. Meanwhile, bond yields have soared, many emerging-market currencies have tumbled, and U.S. crude oil has entered a bear market.

Bitcoin’s 30-day volatility recently fell to the lowest since December 2016, whereas a similar measure for the S&P 500 jumped to its highest since March. The two measures, which reflect how much prices have varied in the past month or so, are now roughly equivalent.

“I’ve got a bunch of buddies running equity hedge funds and they’re joking over the past month or so that they want to come over into the calm crypto market,” said Peter Smith, chief executive of Blockchain Ltd., a cryptocurrency-wallet service.

Some investors say the stability is due to speculators fleeing the market. Bitcoin’s average daily trading volume in October was about 70% lower than the most active days last December, according to bitcoinity.org.

“We’re seeing some institutional buyers come in as other assets are dropping,” said Tony Gu, founding partner at NEO Global Capital, a blockchain investment fund with about $400 million in assets under management. “They’re using crypto as a way to somewhat hedge themselves from volatility in other markets.”

Bitcoin’s absolute volatility is still higher than traditionally stable assets, such as developed-world government bonds or major currencies. But its volatility has trended lower as many other asset price swings have increased.

Rivals such as Ethereum, XRP and Bitcoin Cash have also been relatively steady. Since August, the value of all cryptocurrencies has mostly held just above $200 billion, according to research site CoinMarketCap.

Morgan Stanley

analysts say the stability suggests investors are waiting for the next technological development that gets more people to use cryptocurrencies. This is a major issue for bitcoin, which last month turned 10 years old.

Bitcoin has gone from lulls to frenzied activity before. In 2013, it shot from $100 to more than $1,000 before falling back, according to research site CoinDesk. It took more than four years to reach $1,000 again.

“You see long periods of consolidation and periods of activity in markets, they’re just very pronounced in crypto,” Blockchain’s Mr. Smith said.

Write to Steven Russolillo at steven.russolillo@wsj.com



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