Despite the massive correction or crash (call it what you will), that the market has experienced over the course of January, the cryptocurrency market does appear to be somewhat less volatile since its recovery. February has seen many cryptocurrencies recover and find a price level around half of their all-time high (ATH). If this trend continues, many traders and punters looking to get-rich-quick may be increasingly disappointed by a calmer market. For longer-term investors, blockchain companies, and businesses investing in or receiving cryptocurrencies, however, this will likely be a good outcome.
Professor Mourdoukoutas, Chair of the Department of Economics at LIU in New York, believes that a solution of sorts to Bitcoin’s volatility has come from Wall Street, in the form of Bitcoin futures. Futures are a contract to buy or sell an asset at a set price on a set day in the future. Investors can speculate on the price of Bitcoin without needing to actually own it and businesses and merchants can short Bitcoin futures to reduce risk. Companies that choose to accept or invest in crypto, as well as crypto miners, can bet against Bitcoin and other currencies, thereby reducing the risk they face. This in turn, will likely mean greater adoption by businesses, integration into the global economy and perhaps less volatility in the market.
While a less volatile market might make it less attractive to those looking to ride massive short-term price swings, it will make the asset class inherently more desirable to many businesses and investors who can’t afford to take on the risks involved in investing in cryptocurrency. The high level of risk has so far meant less institutional capital entering the space and less adoption of crypto as a form of payment in other markets.
There may even come a time in the not-too-distant future where the cryptocurrency market looks rather boring to the average newcomer or small-time investor, and common crypto investment strategies take a conventional approach of reducing exposure to risk and focusing on fundamentals rather than chasing the next pump. Although cries of “to the moon” still fill the internet forums and the minds of hopeful punters, there are signs that this trend might already be beginning to take place. This would be a good outcome for the most part. As investors educate themselves and make more rational choices, hopefully more money will flow into a steadier, safer market and the many scams and “shitcoins” will be squeezed out.