The correlation between the stock market and Bitcoin during COVID-19 and other uncertainty periods
Content
Such multi-day changes in price are excluded from analysis, and therefore, the 30- and 60-day metrics for these series use fewer than 30 and 60 data points. Volatility is a measure of how much the price of a financial asset varies over time. Parallel to the ATR, a 20-period Standard Deviation of closing prices quantifies the degree of price movement variation.
Crafting a Model and Narrative to Understand Bitcoin’s Volatility Regimes
Based on the quantile regression results, during periods of high uncertainty, such as COVID-19, the S&P 500 returns significantly affected Bitcoin returns. Moreover, this research applied the VAR (1)–GARCH (1, 1) model to investigate the spillover effect from the stock market to Bitcoin. According to the findings, the shocks from the stock market also influenced Bitcoin’s volatility during COVID-19 and other periods of turmoil.
Bottoming Phase
Directional short-sellers have placed bets against the uptrend, resulting in significant liquidations. This speculation spans both directions, showcasing a heightened risk appetite among Bitcoin investors (Read more). Investing in digital bitcoin era review assets involves significant risks due to their extreme price volatility and the potential for loss, theft, or compromise of private keys.
Is Bitcoin Mining Going To Yield You Profits in the Coming Times?
The Bottoming Phase represents a quiet period following the turbulence of the Reversal Phase. It begins with a shift from high to low volatility, alongside the continuation of a low percentage of addresses in profit. Volatility also increases the cost of hedging, which is a major contributor to the price of merchant services.
Contrary to these results, 35 found that the cryptocurrency market is further maturing through interactions with macroeconomic factors. Several macroeconomic factors added significant volatility to the Bitcoin market and ultimately had a great impact on the trading of Bitcoin options and other derivative instruments during our sample periods. Considering the importance and wide scope of the underlying study, the attempt to precisely estimate implied volatility is central to derivatives market research. Jiang (2001) and Berry and Zuo (2009) studied the Bisection algorithm to precisely estimate implied volatility. Unfortunately, all estimates of implied volatility are only an estimate and are subject to an error tolerance and exhibit efficiency issues (Chance et al. 2016). Therefore, Chance et al. (2016) mentioned the absence of precise root-finding forecasting techniques in the financial and options pricing literature for estimating implied volatility.
Smaller market cap assets are particularly susceptible to the movement caused by whales’ trades and are often more volatile and risky as a result. Circuit breakers are interventions by exchanges to control panic selling or destructive events, but the crypto market doesn’t have these safeguards in place. One major factor contributing to bitcoin’s volatility is the lack of regulation in the crypto market. According to the article, the absence of government oversight and control means that there is no central authority to stabilize the market. Altcoins, once the darlings of speculative traders, face an uphill battle as investors gravitate toward safer, more liquid assets. The regulatory environment is particularly unforgiving for smaller projects, many of which lack the resources to navigate complex compliance requirements.
This information should not be relied upon as a primary basis for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial professional before making an investment decision. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
Grayscale filed to convert its Solana Trust to an ETF, a move that could increase investment in the cryptocurrency. A lack of regulation and oversight in the cryptocurrency market contributes to its volatility. While this still exceeds the volatility of all other assets analyzed, the gap has noticeably narrowed compared to the 10-year period. Traditional financial companies, such as Visa (13.81%) and JPMorgan Chase (14.98%), show about three times less volatility over 10 years than bitcoin.