Why the Bitcoin rally has been less volatile

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Before the end of the year, the price of Bitcoin could cross $20,000. That would see it exceed the all-time high of $19,783.06 registered at the end of 2017.

What is more remarkable is the smooth ride back to the summit. Apart from the start of the bull run in March, when 30-day BTC/USD volatility reached a six-year high, the price of the leading cryptocurrency did not swing as wildly in recent years. Its 180-day counterpart registered a 23-month low in October as well.

All that means is that even if Bitcoin prices move up or down, they may not exhibit major deviations. It is a sign of a maturing market and likely due to the emergence of institutional players (last week, Mexican billionaire Ricardo Salinas Pliego claimed to have invested 10% of his portfolio in bitcoins). In time, the influence of retail investors will diminish.

Consider a trader who disagrees with the high Bitcoin price and believes it must fall. They can take a short position and express their view on the market. In the past, traders were known to have worked in tandem to influence prices in this manner, causing concern and alarm.

In the world of traditional finance, famous ‘short-sellers’ are controversial, as they release damning evidence in the hopes of discrediting a company. They expect to benefit from the fall in prices they engineer, as worried investors stampede to get out. However, they are also respected as an important component of the financial universe. Most short sellers, however, are not so strategic or vocal.